Flight costs $40… carry-on + sandwich costs $400. This week JetBlue made a $3.6B offer to buy budget airline Spirit, topping the $2.9B bid made by rival Frontier in February. Awkward, since Spirit and Frontier had already agreed to a merger that would’ve created a budget behemoth. Spirit said its board would discuss the offer before accepting either bid.
Spirit in the sky… needs a companion. Four carriers dominate the US airline industry: American, Delta, Southwest, and United control 80% of domestic flights. But headwinds are now forcing smaller airlines to merge to survive:
In sight, in mind… Presence is key for airlines and reminds consumers that they exist. You can’t book your LA weekend with an airline that doesn’t have gates at LAX. JetBlue and Frontier need access to more gates to expand into new markets. But they can’t buy gates — at least not directly. That’s why they’re willing to pay a premium for Spirit: it’s an indirect way to buy gates at major airports, a scarce resource they both need.