JetBlue CEO Robin Hayes acknowledged Thursday that a newly signed deal to acquire Spirit Airlines ( NYSE: SAVE ) will receive "a significant amount of regulatory scrutiny," but he argued that the transaction will ultimately add to the competition in the airline industry.
"[The merger is] really creating what I think could be one of the biggest things in the last decade or so in helping the industry in the U.S. remain competitive," the head of JetBlue ( NASDAQ: JBLU ) told CNBC.
Hayes' comments followed news that JBLU had reached a merger agreement with SAVE after a drawn-out bidding war with Frontier Air Group ( ULCC ). SAVE had entered into a previous merger deal with ULCC but terminated that commitment as part of its new combination with JBLU.
Under terms of the transaction , JBLU will purchase SAVE for $33.50 per share in cash, or a total of around $3.8B.
A combination between JBLU and SAVE would create the fifth-largest U.S. airline, behind American ( AAL ), Delta ( DAL ), Southwest ( LUV ) and United ( UAL ).
The size of the combined airline caused many to fear the merger would be struck down by regulators. However, Hayes argued that creating a fifth major competitor would provide the best value for travelers, lowering fares and improving customer service.
"The best thing that we can do to create a more vibrant, a more competitive industry is to really empower this new larger JetBlue," Hayes said.
The ranks of critics of the JBLU offer included Spirit CEO Ted Christie, who had defended the firm's previous agreement with ULCC as much more likely to avoid regulatory scrutiny. During the bidding war, Christie had also called JBLU "childish" and "cynical."
Appearing in the same interview as Hayes, Christie backed off these earlier comments, stating "a lot's been said over the last few months, always with our stakeholders in mind." He noted that he was contractually obligated to defend the ULCC deal when that agreement was in place.
On why the agreement finally came together this week after months of wrangling, the CEOs acknowledged that the financial terms matched what JBLU had been offering "for a while." However, SAVE needed assurances that it could continue to compete during the lead-up to closing, in case regulators blocked the purchase.
Along those lines, Hayes noted that JBLU has already agreed to "unprecedented divestiture commitments" as part of an effort to assuage worries about competition.
For more on the merger deal, see why Seeking Alpha contributor Dhierin Bechai calls the agreement "a desperation buy for JetBlue."
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JetBlue CEO: Spirit merger 'one of the biggest things in a decade' for airline competition