Robin Hayes is better known as a jovial, friendly guy. At industry events, the boss of the American airline Jetblue is often out and about with colleagues and employees late at night. Jetblue also has very loyal customers because they offer more space on board and usually decent service. But the colleagues are just getting to know another, previously unknown side of Hayes: On Monday he started an attempt at a hostile takeover of the large low-cost airline Spirit Airlines.
For a good two years, during the corona pandemic, practically nothing happened in terms of takeovers or mergers in the international airline industry. There were good reasons for this: In view of the almost complete flight stop at times, the management of most airlines was completely occupied with averting insolvencies. There was a lack of time, nerves and of course money for complex integration projects. In addition, governments around the world have kept their airlines alive with loans or subsidies in the magnitude of around 200 billion US dollars – more precise figures can hardly be defined seriously – and thus virtually prevented takeovers. Anko van der Werff, head of SAS Scandinavian Airlines, recently complained that a “unique opportunity” had been missed.
But now the consolidation of the industry is suddenly picking up speed, Jetblue’s fight for Spirit Airlines is just one of many major transactions currently underway. In South America, the Colombian airline Avianca has just ended insolvency proceedings and is now not only taking over its domestic competitor Viva, but is also founding the holding company Abra together with the Brazilian low-cost airline Gol. Avianca and Gol are number two and three in the region, after LATAM Airlines. In India, the TATA Group has taken over the ailing state Air India and will probably merge it with its other airline holding Vistara. In Korea, market leader Korean Air is taking over its biggest competitor, Asiana. And in Europe, the new Italian airline ITA Airways is about to be sold.
It’s been a long time since there was so much movement
The sudden rush also has something to do with the consequences of the pandemic. The airline industry has been in turmoil like never before over the past two years. Some are massively weakened and therefore need new shareholders, some have to reposition themselves to fill gaps in the market or to change their own business model. Still others are interested in attractive aircraft orders from a competitor that enable faster growth. So there hasn’t been that much movement for a long time, and this despite the fact that there are still restrictions on taking over an airline in another country: Normally, airlines have to be owned by majority investors from the country they come from. Exceptions are the European Union because of the internal market and South America because the governments have apparently collectively decided not to pay so much attention to their own regulations.
The future of ITA Airways is likely to be decided in the coming weeks. The new airline, built by the Italian government from the ruins of the Alitalia, is up for sale. By May 23, interested parties must submit binding offers for a stake of at least 51 percent in the airline. Italian Economy Minister Daniele Franco said in Parliament on Tuesday that the sale should be completed by the end of June. Lufthansa has teamed up with the shipping company MSC for its offer, MSC should initially buy most of the money and the larger share. But it is likely that sooner or later Lufthansa will take over the helm, as it did before with Swiss, Austrian and Brussels Airlines. After all, Italy is the second most important international market for Lufthansa after the USA.
All on the condition that she comes to the train. Because Air France-KLM and Delta Air Lines also have an interest in ITA Airways – the two also work together with their predecessors Alitalia and ITA in the Skyteam alliance. And the US financial investor Indigo Partners has also taken a look at the ITA books and could make an offer. How all of this affects consumers will depend on who wins the bid. There should be little impact on prices as inflation and higher fuel costs are much more of a concern.
ITA is currently the most spectacular case in Europe, but not the only takeover candidate in the long term. Van der Werff, who was head of Avianca until last year, is currently trying to restructure SAS. The Dutchman is considered a clear advocate of consolidation, but he must first succeed in stabilizing SAS to some extent after the corona pandemic. Then the Scandinavian airline could be the next sales candidate.
A new low-cost airline made up of Spirit and Frontier would leave Jetblue far behind
Speaking of Indigo Partners: Jetblue boss Hayes’ opponent in the Spirit Airlines takeover battle is 85-year-old Indigo Partners boss Bill Franke, a legendary major investor in the airline industry. Franke’s investment company has a stake in Frontier Airlines and Frontier Spirit actually wants to take over. Together, the two would be the fifth largest American airline after Delta, American, United and Southwest, much larger than Jetblue, Alaska and all the rest. Frankes Frontier has offered $16 per Spirit share. Hayes initially countered with a $33 counteroffer, which Spirit’s board of directors rejected.
Officially, the panel justified its decision with the fact that the American competition authorities would never approve a merger of Jetblue and Spirit, especially since Jetblue also wants to enter into an alliance with American Airlines, against which the US Department of Transportation is currently suing. But Hayes suspects that Franke still has tremendous influence on the key figures on the Spirit board of directors, after all, the airline also belonged to the Indigo Partners empire for some time.
So Hayes now turned to the Spirit shareholders directly with a new offer and thus opposed the decision of the board of directors. The supervisors now want to decide within ten days how to proceed and are asking the shareholders to keep their feet still until then. For Hayes, there is a lot at stake: a new large low-cost airline made up of Spirit and Frontier would leave Jetblue far behind. Jetblue and Spirit together, on the other hand, would become a real industry giant.