While JetBlue announced a GAAP pre-tax loss of $151 million in the second quarter and a reported GAAP loss per share of $0.58, much of the attention and buzz was around how the two airlines would ultimately come together.
JetBlue Reveals New Details in Spirit Merger Deal
In the call transcript posted by Seeking Alpha, executives dedicated a part of the investor presentation to the deal, projecting how it would come together. Chief executive Robin Hayes told those on the call he expected the combined airline to drive up to $700 million in “annual net synergies” in the first full year following the deal’s close. Until then, their energy is focused on running JetBlue as best they can.
“I am very pleased we found the path forward with Spirit and we can’t wait to welcome the incredible 10,000 team members to JetBlue as we create a true national, low-fare high-quality challenger to the dominant Big Four airlines,” Hayes said on the call, as quoted in the transcript. “Together, we will expand our uniquely disruptive combination of award-winning service and competitive low fares to more customers across the country as we combine the best of both airlines.”
Although Hayes reaffirmed expectations the deal would close in 2024, an analyst from JPMorgan asked if pushing back the target merger date was an option. While he wouldn’t commit to a firm date, the executive noted it would take a “fair amount of time” for the deal to close.
“Obviously, we’re not in control of the timeline although we are active participants in the process. And we’re going to continue to engage with both DOJ and DOT as well as we work through the process,” said Hayes. “I do obviously understand people want to know where we are in the process. But equally, I think it’s a process that is going to take some time, and we want to be respectful of the regulators’ view and rights to review this transaction.”
When asked about the debt needed to purchase Spirit, chief financial officer Ursula Hurley announced JetBlue has a 364-day bridge facility for $3.5 billion, which they plan on taking once they receive regulatory approval.
“We will assess the various markets at that point in time and focus on all-in cost of funding, and we will determine appropriately which assets and which markets to utilize in order to take out that bridge,” said Hurley. “Obviously, the cost of debt when we take out the bridge facility, that could be the end of next year or early 2024. So the financing markets at that point in time could look very different than what they look like today.”
In terms of the Northeast and their alliance with American Airlines, JetBlue leaders say their Spirit acquisition is more about growing their network beyond New York and Boston. While those markets will continue to be important, Spirit gives the airline a much bigger footprint in key leisure markets – especially in the Caribbean, Central America and South America.
“As you look about the Spirit transaction, that’s in part what it is about, is the ability to grow more quickly and diversify our network outside of the Northeast,” said Joanna Geraghty, president and chief operating officer or JetBlue. “If you look at the divestitures that we put out there, it’s really keeping the Northeast growth kind of in line with where it is today and growing outside of that geography.”
Executives for JetBlue anticipate Spirit will call a special shareholder meeting in the next 60 to 90 days to formally approve the merger.
Source: frugal travel guy