spirit airlines (NYSE:SAVE) was once the target of a fierce bidding war between two rival companies. frontier group (NASDAQ:ULCC) and jet blue airlines (NASDAQ:JBLU). Less than two years after JetBlue successfully beat out Frontier with a deal that valued Spirit at $34.15 per share, Spirit's stock price plummeted to less than $4 per share.
The drop in stock prices was largely due to the Biden administration blocking a deal with JetBlue, arguing that customers who had benefited from Spirit's low fares would be hurt by the merger.
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Ironically, while the company's market capitalization is currently less than $500 million, the company has more than $1 billion in debt due in 2025 and 2026, leading customers to buy Spirit. You may soon run out of options.
In response, Spirit CEO Ted Christie was furious at the government's “ignorant” decision, saying, “The Department of Justice will block the merger of two companies with a combined market share of less than 8%. “The fact that they filed a lawsuit shows how ignorant they are.” The government values our dynamic aviation business, especially in the post-corona era. ”
Christie further elaborated on the challenges of running a small airline against larger competitors, noting that “nearly all of the profits of the entire U.S. airline industry are concentrated in just two companies. Meanwhile, in what areas are smaller non-legacy airlines scrambling to return to profitability?” It seems more and more like a rigged game. ”
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If Spirit is forced to declare bankruptcy, as some analysts predict, there will be even less competition in the airline industry than before, and incumbent airlines will scoop up its market share.
Helane Becker, an aviation analyst at Cowen, said in January that while it's possible the airline could find another buyer or reorganize as an independent company, “the more likely scenario is Chapter 11. Application and subsequent liquidation.”
Jokes abound about the quality of Spirit's service, including paying for necessities like water, but the airline was ranked the safest airline in 2024 by WalletHub, ranking behind JetBlue and Frontier in terms of reliability. scored better than both.
Regardless of whether or not the airline industry is truly a match-fixer, it is certainly an industry in which it is difficult to make a profit over the long term.
Legendary investor Warren Buffett said in 2007, “If a visionary capitalist had been at Kitty Hawk, he would have shot Orville and done his successors a huge favor.'' is famously rejected by the industry.
He finally went against previous advice and amassed a multibillion-dollar position in Big Four American Airlines in 2016, only to sell it at a steep loss at the start of the coronavirus pandemic. .
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The article reads: Spirit Airlines CEO slams “ignorant government” and says the airline industry is a “rigged game” as the company struggles to survive.
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