Jim Corridore, Senior Insights Manager at Similarweb, joins Cheddar News to break down JetBlue's deal to buy Spirit Airlins for $3.8 billion.

Closing Bell

Breaking Down the Fallout from the JetBlue-Spirit Merger

Welcome back to closing bell and cheddar news everyone. Well, JetBlue finally succeeded in blocking frontiers merger with a budget carrier Spirit. And now JetBlue is acquiring spirit for 3.8 billion after months of aggressive bidding, the deal would create the country's fifth biggest carrier but does face strong antitrust scrutiny. And joining me now is Jim Corridor senior insights manager at similar web. Jim thanks so much for coming on. What's in this for JetBlue? It raised its price multiple times. What does it want in spirit number one, What they got to do is they get to block the frontier deal which would have made a carrier that was substantially larger than JetBlue created scale and the low cost space and given them a lot of competition and made pricing power a little less possible for the industry. Uh, secondly, they do get to grow their fleet by about 62% at a time when pilot shortages and crew shortages are big in the industry And they do get to scale up their market share according to similar Web data would be about 12%. So it starts to approach United 15%, Delta 16, American 19 and Southwest 23. So they do gain scale in the industry Interesting. is pretty close as you note there to United, where will most of these flights be going from Libya across the country Jim or just really hubs on the east coast. Yeah, I think that obviously JetBlue strength is on the East Coast. Spirit has more midwest flair. So I think we do fill the interior of the country with a little bit more flights. But transcontinental gets stronger as well. I think Jeff Lowe has the ability to deploy these planes wherever they want. So probably more transparent as well. And as someone who follows the data closely, the web traffic, do you think that there will be customer demand for emerged company? Yeah. Well, first of all, you know, there's gonna be one less choice. So those yellow planes that we all see flying around and the Spirit name goes away, JetBlue will take those and paint them blue and customers will go wherever the flights go. So I don't think it's going to impact demand in that way. Okay, with a combined carrier here. If this deal is approved by regulators, what might it mean for consumers? Jim do you think it could lead to better or worse prices? Ultimately, I do think it does lead to higher prices for consumers. Unfortunately, right now, I do believe airlines are charging as much as they can because there is a supply and demand imbalance in the industry due to the pilot shortages and the inability to complete their schedules. So airlines are getting a lot of pricing power. But later down the road where demand softens a little bit, I think bears would be higher than they otherwise would have been because it was a big price destructor. All the top five airlines did have to match them, including JetBlue and that goes away under this deal. Okay, so consumers should get ready. It sounds like unfortunately pay some higher prices. Jim What about Frontier, will Frontier then be able to keep lower prices with this newly emerged company? Again, if it is approved by regulators? Yeah, obviously Frontier stock is up today probably on speculation that the spirit deal wasn't all that great for them Anyway, they are going to be able to expand. They may look to partner, partner up with maybe an Allegiant or in Alaska or somebody else because consolidation starts in this industry, it doesn't stop necessarily. And everybody who's on the lower rungs is gonna have to find a partner in order to get stronger. Okay, so if Frontier does merge within Alaska for instance, what kind of market share would that be? Would that be competitive with this potentially newly combined company between JetBlue and Spirit. Frontier has about 3% market share under similar Web estimates. So frontier potentially combined with Alaska would give them about 89% share. Not nearly as much as JetBlue does build with spirit, but it does make them more competitive in that marketplace. And again, as someone who follows the data closely jim what are you seeing in terms of traffic for flights here heading into the fall, we are going to have them back to school season. So some of these families taking vacations might start to slow but there is some expectation that business travel might pick up, What are you seeing? Yeah, clearly starting with summer, we did see that traffic to airline websites was passed pre pandemic levels, so demand very strong through summer. In the fall we do see some signs of deceleration and web traffic which could be an early indicator that there is a little bit of softening. Some of that of course is a seasonal pattern as kids go back to school and demand softens a little bit naturally but certainly still strong compared to where we were just a year and a half ago where the airlines were struggling to scribe, Who do you think is the clientele for a merged company between JetBlue and Spirit? Is it a business traveler or is it just a traveler for fun. Yeah, I think JetBlue does have a good offering to the business traveler. They have those lie flat mint seats which play very well across the country on on transcontinental flights. Um so they do attract a lot of leisure travelers as well. They did have their roots starting out very much similar to the spirit model where they came into a market with low fares and they stimulated demand. So I think they do appeal to all segments of the consumer and the business travel. All right, jim corridor senior insights manager, a similar web tracking that web traffic jim. It's good to see you. Thank you