After JetBlue and Spirit part ways, South Florida retains its ‘hometown’ airline, but what’s next?

Say what you will about the merits or downsides of JetBlue Airways and Spirit Airlines muscling up as a merged airline to compete against the U.S. aviation industry’s “Big 4” players of American, Delta, Southwest and United.

The decision by Miramar-based Spirit and JetBlue of New York, both predominant carriers at Fort Lauderdale-Hollywood International Airport, to terminate their $3.8 billion merger deal means there still will be two sizable discount airlines, not one, serving the Broward County airport, most likely maintaining high traffic levels generated by travelers looking to fly on the cheap.

Leisure travel demand is a key feature promoted by local airport and economic development leaders who long have made a point of attracting discount carriers to serve a Greater Fort Lauderdale region that counts heavily on tourism as a core driver of its local economy.

“Spirit and JetBlue are the two largest carriers at the Fort Lauderdale-Hollywood International Airport (FLL), accounting for approximately 50 percent of passenger traffic combined in 2023,* Mark Gale, CEO/Aviation director for the Broward County Aviation Department, said in an emailed statement to the South Florida Sun Sentinel.

“Both airlines have had a significant presence at FLL for more than two decades and the Broward County Aviation Department anticipates both carriers will maintain their sizable presence while independently continuing to pursue growth opportunities at FLL in the future,” he said.

Financial turbulence

But both still face significant headwinds now that their futures are decoupled. Neither is in good financial shape; both are undertaking measures independently to restore themselves to profitability while facing obstacles on the marketplace and financial fronts.

“Both airlines face enormous challenges, from improving operational reliability to improving their balance sheets,” said Henry H. Harteveldt, president and travel industry analyst at Atmosphere Research Group, a San Francisco-based consulting firm.

“Neither airline has a clear image or brand value proposition these days — marketing challenges that need to be addressed,” he asserted Monday.

And anything JetBlue does is likely to be closely watched by shareholder activist Carl Icahn, who now owns nearly 10% of the airline and managed to persuade JetBlue “to add two of his colleagues to the airline’s board,” Harteveldt noted.

But newly appointed CEO Joanna Geraghty insisted her airline “has a strong organic plan and unique competitive advantages, including a beloved brand, a unique value proposition, and high-value geographies.”

“We have already begun to advance our plan to restore profitability,” she added in a statement. The plan includes squeezing $175 million to $200 million in cost savings from its operations.

Nonetheless, JetBlue’s unionized cockpit crews represented by the Air Line Pilots Association said they are looking to reopen contract negotiations for higher pay and benefits. “When the merger was initially proposed, we opted for a short-term extension rather than a full comprehensive contract, anticipating a joint collective bargaining agreement post-merger.”

But the deal’s end “has altered the landscape significantly,” the pilots said Monday. “Our attention must shift to attaining our contractual objectives as a single, unified pilot group.” They want a deal on a par with Delta and United pilots.

Outlook for Spirit

Spirit, which emerged as a major discount force after it landed in South Florida in 1999, is looking for ways to ease its debt load, manage its way through reported manufacturing defects on many of its jetliner engines, and boost revenues so they offset rising labor costs.

But as with JetBlue, the ink was barely dry on the announcements about the merger termination Monday when the Spirit contingent of ALPA announced it, too, intended to reopen contract negotiations.

“Our union has been preparing for this possible outcome and is ready to write the next chapter for Spirit Airlines as a standalone company,” said Captain Ryan Muller, chair of the Spirit ALPA Master Executive Council. “Our current contract was negotiated under the assumption of a merger with JetBlue. Now we will be seeking a full suite of quality-of-life and compensation improvements for our pilots.”

During a conference call with Wall Street analysts last month, CEO Ted Christie counter-punched against those who suggested the carrier might need to enter bankruptcy court to overhaul its finances. He denounced the narrative as “misguided” and said the company has enough liquidity to power through the year. As part of their termination agreement, JetBlue will pay Spirit $69 million.

“Spirit is confident in its strengths, and is focused on returning to profitability,” Christie said in a statement Monday. “The company has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations, including assessing options to refinance upcoming debt maturities.”

JetBlue’s Florida commitments

For JetBlue, Fort Lauderdale-Hollywood has been a key component of its route system since launching in the early1990s.

The airline has substantial stakes in play at the Broward County airport, a destination that is likely to continue to play an important role for the airline as it struggles to fix its finances, in part by recalibrating its route system.

Despite JetBlue’s willingness to offload some of its airport gates to Allegiant Air as part of its bid to diminish the government’s antitrust argument in court, there was no sign Monday that the airline will back out of its commitment as manager of the airport’s Terminal 5 construction project.

“We do not anticipate any changes to JetBlue’s involvement at this time,” Gale said.

The “T5 project” he noted, “is being funded by a number of sources, including state grants, passenger facility charges, and general airport revenue bonds.”

But JetBlue’s 2022 pretrial settlement agreement the airline signed with Florida Attorney General Ashley Moody to substantially increase its flight services is also terminated, state and JetBlue spokesmen said Monday.

Among other things, the deal set minimum flight capacity levels for seven years at Fort Lauderdale-Hollywood and Orlando International Airport.

“The remaining obligations in the Florida settlement are mooted, and thus not enforced by this office, unless JetBlue and Spirit enter into an amended or new merger agreement within two years from the date of the agreement,” said Chase Sizemore, spokesman for the attorney general.

At this point, no one has raised any possibility of a new deal.