JetBlue plans to buy Spirit: Time to watch airline stocks JBLU & SAVE?

July 29, 2022 01:11 AM PDT | By Mridul Gogoi
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  • JetBlue Airways Corp. (Nasdaq: JBLU) clinches a US$3.8 billion deal to buy Spirit Airlines.
  • Spirit Airlines Inc. (NYSE: SAVE) shares rose 5.6 per cent on Thursday after the acquisition news.
  • Spirit reported a revenue of US$967.32 million in Q1 of fiscal 2022.  

Shares of heavy discounter Spirit Airlines Inc. (NYSE: SAVE) closed 5.3 per cent higher on Thursday as it agreed to a US$3.8 billion deal to be acquired by JetBlue Airways Corp. (Nasdaq: JBLU). 

The cash deal was fructified a day after Spirit Airlines walked away from a planned US$2.6 billion stock-and-cash merger with Frontier Group Holdings Inc. (Nasdaq: ULCC).

According to the agreement, JetBlue is likely to pay US$33.50 per share for Spirit. The deal now awaits approval from Spirit shareholders. 

Let's look at the two airline stocks amid the acquisition deal:

Spirit Airlines Inc. (NYSE: SAVE)

Stocks of Spirit Airlines closed 5.3 per cent higher on Thursday amid the acquisition announcement. SAVE stock has jumped 14.1 per cent in 2022.

The airline reported a revenue of US$967.32 million in Q1 2022 versus US$461.28 million in the year-ago quarter. Its gross profit for Q1 FY22 was US$22.15 million relative to US$158.45 million in the first quarter of 2021. 

The company has a market cap of US$2.8 billion. In the last 52 weeks, the stock touched the highest price of US$28.97 and dropped to US$15.92 as its lowest price. 

According to Refinitiv, SAVE stock's Relative Strength Index (RSI) was 62.77 on July 29, 2022. This can indicate that it was not oversold.   

JetBlue Airways Corp. (Nasdaq: JBLU)

While SAVE stock rose on the news of the acquisition, JetBlue stock declined on the day of the announcement. JBLU ended 0.35 per cent lower at US$8.37 on Thursday than its previous close. 

JetBlue Airlines, whose fleet includes Airbus A320, Airbus A321, and Embraer E190 aircraft types, saw its stock dive 43 per cent year-to-date (YTD). It has plunged 6.5 per cent over the last month.

The low-cost flyer earned a revenue of US$1,736 million in the quarter ended March 31, 2022, noting an increase of 137 per cent year-over-year (YoY).

JetBlue has a market cap of US$2.68 billion. Its Relative Strength Index (RSI) was 46.26 as of July 29, 2022, according to Refinitiv data. 

Bottom line

If Spirit Airlines shareholders approve this acquisition, the combined market share of the two airlines is expected to be nine per cent. Together, they are also projected to become the fifth-largest US airline.

As the travel-related COVID restrictions are lifted, airline companies are hoping to return to their pre-pandemic profits level, which could impact airline stocks.


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