A Southwest Airlines Co. Boeing 737 passenger jet pushes back from a gate at Midway International Airport (MDW) in Chicago, Illinois.
Luke Sharrett | Bloomberg | Getty Images
Check out the companies making the biggest moves premarket:
Southwest — The airline dropped 2.1% after reporting a $220 million loss for the fourth quarter after the holiday meltdown cost the company millions in expenses and drove up expenses.
Comcast — The media company reported fourth-quarter earnings that beat Wall Street’s expectations, with earnings per share coming in at 82 cents, adjusted, versus the 77 cents expected from analysts surveyed by Refinitiv. Revenue was $30.55 billion compared to the $30.32 expected. Shares, however, were down less than 1% in the premarket.
Tesla — The electric-vehicle maker soared 7% after reporting record revenue and an earnings beat. CEO Elon Musk said Tesla might be able to produce 2 million cars this year.
Las Vegas Sands — Shares of the hotel and casino operator rose about 4% despite the company posting weaker-than-expected financial results for the most recent quarter. Wall Street analysts cited upbeat comments about its reopening in Macao on the company earnings call for their positive outlook on the stock.
Levi Strauss — Shares of the denim maker popped 6% premarket on a better-than-expected quarterly report. Levi Strauss topped analysts’ revenue estimates and beat earnings projections by 5 cents a share.
Blackstone — Blackstone shares dipped less than 1% after the asset manager reported mixed earnings results. Total segment revenues fell short of expectations, while distributable earnings beat estimates by 12 cents a share.
Chevron — The energy giant jumped more than 3% in premarket after the company announced a $75 billion stock buyback program and a dividend hike to $1.51 from $1.42 per share. The buyback program will become effective on April 1.
Dow — The chemicals giant posted fourth-quarter earnings, revenue and adjusted EBITDA that missed analyst expectations before the bell Thursday, sending the stock down more than 3% in premarket trading.
IBM — Shares of IBM shed 2.7% after the company reported quarterly results Wednesday that generally exceeded Wall Street’s expectations but included an announcement that the firm will cut 3,900 jobs. IBM reported adjusted earnings per share of $3.60 per share on $16.69 billion in revenue where analysts expected $3.60 per share and $16.4 billion in revenue, per Refinitiv.
American Airlines — The airline gained 1.5% after its fourth-quarter profits beat Wall Street’s expectations, thanks to strong holiday demand and high fares.
Seagate Technology — The data storage company jumped more than 8% in premarket trading after reporting earnings and revenue for the last quarter that beat expectations.
Pfizer — The pharma giant was downgraded by UBS on Thursday, which said Pfizer’s Covid franchise estimates need to come down and its pipeline is too premature. Pfizer was up less than 1% in the premarket.
— CNBC’s Carmen Reinicke, Yun Li, Samantha Subin, Tanaya Macheel and Michael Bloom contributed reporting.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
The new Delta SkyClub at Los Angeles International Airport (LAX), Terminals 2 and 3 where the reimagined state-of-the-art facilities will soon welcome millions of guests each year.
Media News Group | Long Beach Press-Telegram via Getty Images
When United Airlines gate agents call the first boarding group, Ted Cohen notices something he never saw in his decades crossing the globe as a music industry executive: crowds.
The “preboarding” group includes members of United Global Services, an invitation-only status for top customers, and United Premier 1K, an upper-level tier in the airline’s Mileage Plus frequent flyer program.
“It used to be two or three people, and you used to say, ‘Who is that?’ And now it’s a small army,” said Cohen, who leads a digital entertainment consulting firm and has lifetime elite status on United and American Airlines.
Welcome to air travel’s era of mass luxury.
Travelers willing to shell out more for tickets and popular rewards credit cards are swelling ranks in front cabins and airport lounges. Now airlines are trying to handle the surge of big spenders — without compromising the appeal of their lucrative loyalty programs and most expensive seats. This year, not everyone will make the cut.
The largest U.S. carriers — Delta Air Lines, American and United — are raising spending requirements to earn some elite frequent flyer tiers that grant free upgrades, early boarding, discounted or complimentary lounge memberships and other perks.
Executives say the richer requirements are the product of the pandemic. Airlines had extended frequent flyer status without requiring travelers to meet the usual annual thresholds because would-be passengers were sidelined. In the meantime, customers kept spending on their rewards credit cards, racking up points and perks along the way.
“We feel like we’re royals even though we’re not rich at all,” said Damaris Osorio, a 27-year-old based in New York who runs a vintage clothing business.
Osorio frequents airport lounges on trips booked with rewards points that she earned through strategic credit card use and sign-up bonuses. Last year she and her fiance traveled to Brazil, Chile, Argentina and Italy, all on flights she paid for with points.
She said she cares little about sitting in the front of the plane, but has a preference for the American Express Centurion Lounges, which she gets into with one of her Amex cards. Osorio realizes she’s not alone.
“You notice how much busier it’s getting at the lounges,” she said. “I go as early as possible to maximize what I’m taking away.”
Next month, Amex Platinum cardholders will be charged $50 for each guest they bring to a Centurion Lounge. Those cardholders can currently bring in two guests for free.
‘If everyone is special, no one feels special’
For the airlines, hordes of high spenders are a good problem to have two years after the pandemic drove them into a $35 billion hole, despite billions in taxpayer aid. Airlines are profitable again, with travel roaring back and flyers who are willing to pay up for a little bit more space or privacy on their trip.
Airlines’ lucrative credit card partnerships helped them stay afloat in the pandemic. They sell miles to credit card companies, and bringing in billions of dollars.
Now they have a lot of travelers itching to cash in rewards.
If they call biz class boarding and it’s like the start of the Indy 500 … it’s not going to be a pleasant experience.
Henry Harteveldt
founder of Atmosphere Research Group
Delta said in an investor presentation last month that premium products and non-ticket revenue will make up 57% of its sales this year, up from 44% in 2014 and 53% in 2019, before the pandemic. That category includes revenue from top-end international business-class seats, extra-legroom seats and other sources, such as its partnership with American Express.
After some customers complained about crowds and long lines at its Sky Club airport lounges, Delta said late last year that it will raise the prices and the requirements to gain access to those facilities. Earlier in 2022, it also instituted a three-hour time limit for lounge use and created a VIP line for high-status holders.
CEO Ed Bastian said recent policy changes aim to address pandemic-era status extensions and the rise of customers spending more for travel.
“We’ve got to address that in some way to be fair to everybody, because as they say, ‘If everyone’s special, no one feels special,'” Bastian said in an interview last month. “We’re trying to do it in a fair way.”
United’s chief customer officer, Linda Jojo, put it similarly at a recent industry conference. “If everybody has status then nobody has status,” she said.
In November, United said it was raising the requirements to earn status and perks.
United also opened a new mini-lounge at its hub at Denver International Airport, catering to customers on the go who are flying on regional feeder jets, a move that could help free up space in larger facilities for travelers hanging out longer.
United Airlines Polaris lounge at Newark Liberty International Airport
Leslie Josephs | CNBC
Last month, American Airlines said customers will have to spend or fly more to reach the lowest elite tier in its AAdvantage frequent flyer program. Customers will soon need 40,000 so-called loyalty points instead of 30,000 for Gold status.
Bigger space for big spenders
Delta, American, United and American Express have been opening bigger airport lounges to fit more travelers.
American and its trans-Atlantic partner British Airways in November opened new, high-end lounges at John F. Kennedy International Airport with showers, bars and lots of workspace. The three lounges roughly double the square feet that American previously offered at JFK to about 65,000 square feet, an airline spokeswoman said.
“There’s a tremendous demand for it, and we got to make sure that we are taking care of customers how they want to be taken care of,” American Airlines CEO Robert Isom said at the JFK lounge opening.
Several full-service carriers have also moved away from long-haul first class cabins in favor of more premium economy seats — in between business-class and standard coach seats — and larger business-class cabins that fit scores of travelers, particularly on long flights.
Many of the newer business-class seats are roomier and come with more amenities than first-class seats of the past.
A new American Airlines and British Airways lounge at John F. Kennedy International Airport, November 29, 2022.
Leslie Josephs | CNBC
American Airlines is planning to get rid of a separate first class on some older planes used to fly longer routes in favor of a single, expanded, business class featuring new suites with doors.
The airline said premium seats on its long-haul fleet will increase by more than 45% by 2026.
But with the expansion of that cabin comes the risk of diluting the premium feel, said Henry Harteveldt, a former airline executive and founder of Atmosphere Research Group.
“If they call biz class boarding and it’s like the start of the Indy 500 and you have 70 people jostling to get down the jet bridge, it’s not going to be a pleasant experience,” he said.
‘I don’t sit behind the wing’
With demand still strong, redeeming miles for flights this year might cost more.
Michael Calarco, a part-time consultant who helps travelers book trips with their rewards points, said it’s been harder to find seats lately because planes are flying so full after travel restrictions lifted, including to international destinations.
He recommends flyers be as flexible as possible with their dates if they want to cash in their points for a trip, and to avoid major holidays.
“There’s not much I can do if someone wants to go to the Maldives two months away,” he said.
Some travelers say comfort is worth cashing in chunks of the points they’ve been sitting on.
“I don’t sit behind the wing,” said Mark Ophaug, 40, who works at an educational technology company and has a top-tier status with United’s Mileage Plus program. He and his husband are planning to visit his in-laws in Buenos Aires this year and plan to use United PlusPoints to upgrade to lie-flat seats.
“It’s a long flight, and I want to lie down,” Ophaug said.
Aircraft are deiced at General Mitchell International Airport in Milwaukee
Reuters
Flight cancellations eased further on Monday but disruptions from severe winter weather across the U.S. lingered at the tail end of Christmas weekend.
Airlines have canceled more than 17,000 U.S. flights since Wednesday, according to FlightAware, as storms brought snow, ice, high winds and bitter cold around the country, derailing air travel from coast to coast. Those conditions slowed down ground crews as they faced severe conditions at airports.
Carriers are likely to detail the costs of the disruptions when they report results next month, if not earlier.
Southwest Airlines was especially hit hard by the winter storms over the holiday travel period, along with other issues including unexpected fog in San Diego and staffing shortages at a fuel vendor in Denver, the carrier’s chief operating officer told staff.
Southwest had been canceling many flights proactively in an effort to stabilize its operation, COO Andrew Watterson said. From Wednesday through Saturday, about a quarter of Southwest’s flights were canceled, and two-thirds were delayed, according to FlightAware data.
The airline apologized to employees for the chaos, which left many struggling to get a hold of crew scheduling services, making it harder to get reassignments or make other changes, or get hotel rooms. Southwest also offered flight attendants working over the holiday extra pay.
“Part of what we’re suffering is a lack of tools,” Southwest CEO Bob Jordan said in a message to staff on Sunday. “We’ve talked an awful lot about modernizing the operation, and the need to do that. And Crew Scheduling is one of the places that we need to invest in. We need to be able to produce solutions faster.”
Airlines often cancel flights proactively during bad weather to avoid having planes, crews and customers out of place, problems that can make recovery from a storm more difficult.
Carriers also planned smaller schedules for Christmas Eve and Christmas Day compared with the days leading up to the holidays, making it harder for them to rebook travelers on other flights, and bookings had spiked.
Passengers check in at the Delta counter at Detroit Metro Airport in Romulus, Michigan, on December 22, 2022.
Jeff Kowalsky | AFP | Getty Images
On Monday, more than 1,700 flights were canceled and 2,200 more were delayed, down from nearly 3,200 canceled flights and 7,700 delayed U.S. flights on Sunday.
Delta Air Lines, American Airlines, United Airlines, JetBlue Airways and Alaska Airlines were among the other carriers affected by the weather.
An American Airlines spokeswoman said the “vast majority of our customers affected by cancellations were able to be reaccommodated.”
Delta is “seeing steady recovery in our operations, and expect the improvements to continue over the next several hours,” a spokesman said Monday.
Passengers also faced delayed luggage, however.
Bill Weaver, 41, said he, his wife and five children drove from Wichita, Kansas to Dallas Fort Worth International Airport for a Friday flight to Cancun after their connecting flight into the American Airlines hub was canceled. The American Airlines flight to Cancun arrived on time but their luggage didn’t get to in Cancun until Monday, and hadn’t made it to their hotel by mid-morning, so they had to spend hundreds of dollars to buy clothing and other essentials at their hotel.
Weaver, who works in software sales, said he used to travel frequently.
“I’m used to missing bags and things happen but this is by far the worst I’ve ever seen,” he said.
Extreme cold and high winds slowed ground operations at dozens of airports. More than half of U.S.-based airlines’ flights arrived late from Thursday through Saturday, with delays averaging 81 minutes, according to FlightAware.
“Temperatures have fallen so low that our equipment and infrastructure have been impacted, from frozen lav systems and fuel hoses to broken tow bars,” said United Airlines message to pilots on Saturday. “Pilots have encountered frozen locks when trying to re-enter the jet bridge after conducting walk arounds.”
The FAA said it had to evacuate its tower at United hub Newark Liberty International Airport in New Jersey because of a leak on Saturday.
JetBlue, meantime, offered flight attendants triple pay to pick up trips on Christmas Eve due to staffing shortages.
American Eagle Bombardier CRJ-900ER aircraft seen at Phoenix Sky Harbor International Airport.
Alex Tai | SOPA | Getty Images
American Airlines said Saturday that it will drop Mesa Air for some of its regional flying, citing concerns about its partner’s financial and operational problems, issues that are tied to a rise in costs and the industry’s pilot shortage.
“As a result, we have concerns about Mesa’s ability to be a reliable partner for American going forward,” Derek Kerr, American’s chief financial officer and president of American’s regional brand American Eagle, said in a staff note, which was seen by CNBC on Saturday. “American and Mesa agree the best way to address these concerns is to wind down our agreement.”
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The final Mesa flight for American will be on April 3, though American is slashing Mesa flights in March, Kerr said in his note.
Now, Arizona-based Mesa is planning to transition “all of our CRJ900 flying to United Airlines,” a carrier it already flies for, Mesa’s CEO Jonathan Ornstein said in a note to staff on Saturday, which was seen by CNBC.
Uniteddeclined to comment.
Large carriers like American, United and Delta Air Lines routinely contract regional airlines to fly many shorter routes, and they account for roughly half of departures, though that varies by airline.
The heart of the problem stems from a shortage of pilots, which is most acute at regional carriers, and has become more severe since travel demand snapped back after a pandemic travel slump. Mesa and other regional airlines have sharply raised wages to attract and retain aviators. American raised wages at its regional subsidiaries.
American declined to fund higher pilot rates for other regional partners, Mesa’s CEO told staff, adding that they were penalized for not being able to meet pre-Covid contract obligations.
“With that in mind, we are excited to announce we have negotiated a wind down of our operations with American and are finalizing a new agreement with United which would transition all CRJ900s currently flying for American Eagle to United Express,” Mesa’a Ornstein said.
American didn’t comment on the Mesa note to staff.
Mesa had a net loss of about $67 million in the nine months ended June 30, according to a securities filing. Last week, the Phoenix, Arizona-based airline postponed its quarterly earnings report.
American said its agreement with Mesa was mostly tied to its hubs at Dallas/Fort Worth International Airport and Phoenix Sky Harbor International Airport.
American plans to concentrate its flying with its wholly owned regional subsidiaries like Envoy and PSA, as well as an independent regional carrier SkyWest. Air Wisconsin will also fly for the American Eagle brand, starting its agreement earlier than originally planned, Kerr said.
“The flying previously done by Mesa will be backfilled by these high-quality regional carriers as well as our mainline operation, ensuring we can continue to build and deliver the very best global network for our customers,” Kerr wrote.
A mascot of TripAdvisor is seen at its display at a trade fair.
Axel Schmidt | Reuters
Check out the companies making headlines in midday trading.
Carvana — Shares of the online car dealership fell more than 32% after Carvana’s largest creditors signed an agreement to negotiate together with the company. Bankruptcy concerns around Carvana have grown since the company reported disappointing third-quarter results last month. The pact between the creditors was first reported by Bloomberg.
MongoDB — The database platform surged almost 22% following the company’s quarterly results. Mongo posted better-than-expected revenue for the most recent quarter and issued upbeat fourth-quarter revenue guidance, according to Refinitiv.
State Street —Shares of the asset manager jumped more than 8% after the company announced a new buyback plan. The company said it now intends to buy back up to of $1.5 billion of its common stock in the fourth quarter of 2022, $500 million more than the amount announced previously.
Online travel — Online travel stocks dropped after Wolfe Research downgraded the sector to market underweight from market weight, citing trouble ahead on the likelihood of a recession. The firm named a worse outlook for names such as Booking Holdings, Airbnb, TripAdvisor and Expedia. Shares of TripAdvisor and Expedia were down more than 6%. Booking Holdings fell more than 4%, and Airbnb shed 3%.
Stitch Fix — Shares gained 3%, bouncing back from an earlier dip during pre-market trading. On Tuesday, the company posted quarterly results that fell short of analysts’ expectations, according to FactSet. Stitch Fix also trimmed its full-year forecast.
Toll Brothers — Shares of the luxury homebuilder rose 7% after the company reported quarterly results. Toll Brothers posted home sales revenue that was better than Wall Street expectations, according to Refinitiv.
Dave & Buster’s Entertainment —Dave and Buster’s stock shed more than 4% despite the company posting solid quarterly revenue on Tuesday. The entertainment company also provided an update on the fourth quarter, noting that through the first five weeks of the period, pro forma combined walk-in comparable store sales declined 2.4% versus the comparable period in 2021. However, those sales have increased 15.7% over the same period in 2019.
SolarEdge Technologies — The solar stock gained 3.6% after Bank of America upgraded it to a buy from neutral. The firm said the stock could gain more than 20% as its outlook improved.
Campbell Soup — Shares rose more than 5% after Campbell Soup topped forecasts on the top and bottom lines in its latest earnings report. The food producer cited “inflation-driven pricing, brand strength and continued supply recovery” for its recent results.
Chinese tech stocks — Shares of U.S. listed China stocks declined even as Beijing announced it will lift some Covid restrictions. JD.com and Baidu were each lower by more than 2%.
Airlines — Airline stocks fell as a group during midday trading. Shares of Southwest Airlines declined nearly 4%, while American Airlines slid 4.3%. Shares of Delta Air Lines, Alaska Air Group and United Airlines each slipped more than 3%.
Lowe’s Companies — Shares added more than 3% after Lowe’s affirmed its full-year guidance, and announced a new $15 billion share repurchase program. The home improvement retailer is hosting its annual analyst and investor conference on Wednesday.
— CNBC’s Alex Harring, Yun Li, Tanaya Macheel, Jesse Pound and Samantha Subin contributed reporting
Pilots talk after exiting a Delta Airlines flight at the Ronald Reagan National Airport on July 22, 2020 in Arlington, Virginia.
Michael A. McCoy | Getty Images
Delta Air Lines is getting closer to a labor deal with pilots, their union said, marking a big improvement in a relationship that turned icy during years-long negotiations.
A preliminary deal this year would clear a major hurdle for Delta. Other carriers, including rivals United and American have also failed to reach new labor agreements. Contract talks were derailed during the pandemic as travel demand plunged and carriers booked record losses.
Airlines are now profitable again but negotiations have remained difficult throughout the industry. Delta, American, United, FedEx and Southwest pilots have picketed in recent months to demand better pay and schedules. Passenger airline pilots complained about poor quality of life from frequent flight changes and grueling schedules.
“While it is unclear exactly what the catalyst was for management’s movement toward our asks this past week, it was decisively the most productive week of negotiations” since talks opened more than three years ago, the Air Line Pilots Association said in a memo to Delta aviators on Monday.
Last month, Delta pilots voted overwhelmingly to authorize a potential strike if contract talks don’t lead to an agreement.
Some major issues are still pending, like compensation and retirement packages, the union said, but it was upbeat.
The union said it is “entirely possible” that a full agreement in principle may be reached at an upcoming session. But it said that will require management “to continue to show the motivation that resulted in progress this past week.”
A Republic Airways plane approaches the runway at Ronald Reagan Washington National Airport (DCA) in Arlington, Virginia, on April 2, 2022.
Daniel Slim | AFP | Getty Images
The Federal Aviation Administration on Monday said it has rejected a proposal to halve the number of hours required to become a co-pilot, as a severe shortage of aviators prompts carriers to cut routes.
Republic Airways, which flies short routes for Delta, American and United, proposed to regulators in April that pilots be allowed to join an airline after 750 hours of flight time once they’ve completed the carrier’s training program.
Normally, 1,500 hours of flight time are required before a new pilot can fly commercially, though there is an exception for certain military experience that cuts the requirement in half.
The so-called 1,500-hour rule was passed after the fatal Colgan Air crash in February 2009 near Buffalo, New York. The crash also led to new requirements for a minimum period of rest for pilots before a flight.
“The FAA considers it to be of greater public interest to ensure and maintain the level of safety provided by the foundation of an integrated aviation education required by” current criteria, the agency said in its decision, which was released a day ahead of a regional airline conference in Washington, D.C.
The FAA’s decision comes as airlines grapple with a severe shortfall of pilots, which executives have blamed on service cuts, particularly to small cities.
Check out the companies making the biggest moves midday Monday:
D.R. Horton, Lennar, PulteGroup — Homebuilder stocks moved higher on Monday after KeyBanc double upgraded the sector to overweight from underweight. Analyst Kenneth Zener said that homebuilders, which have underperformed this year, tend to rebound sooner and more sharply than the broader market. Shares of Lennar rose about 2%, while D.R. Horton gained over 2%, and PulteGroup jumped nearly 4%.
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Morgan Stanley downgrades payments company NCR, says investors need clarity after split announcement
Array Technologies — The solar stock jumped over 3% after Piper Sandler upgraded Array Technologies to overweight from neutral, saying the company has more upside ahead on an improved forward outlook.
SunOpta — Shares of SunOpta rallied more than 5% after being named a top pick by Cowen. Analyst Brian Holland, who has a buy rating on the stock, wrote in a note that “the company’s agnostic posture and capital execution is affording strong growth sight lines underappreciated by the market.” His $15 price target implies 55.9% upside from Friday’s close.
Opendoor Technologies — Opendoor dropped 6% after a Bloomberg reported the iBuyer lost money on 42% of its August resales. Like others in the housing space, the company faces headwinds including a housing recession and mortgage rates over 6%.
AutoZone — AutoZone shares fell more than 2% as traders pored over a mixed quarterly earnings report. The company’s gross margins of 51.5% were slightly below a StreetAccount estimate of 51.9%. Still, AutoZone earned $40.50 per share in the previous quarter, beating a forecast of $38.51 per share.
NCR — Shares of NCR slid almost 3% after being downgraded to equal-weight from overweight by Morgan Stanley. The firm said the path to unlocking shareholder value is “less clear and longer tailed” after the enterprise payment solutions company said Friday it would separate into two companies.
Wix — Shares of Wix soared 11% after activist investor Starboard Value revealed a 9% stake in the web development platform company. According to Reuters, Starboard has spoken to Wix about how it can improve operations of the company, which has lost half its value this year.
Coinbase — Shares of the cryptocurrency exchange fell more than 7% as the price of bitcoin dipped to its lowest level since June and traders continued unwinding short positions following the completion of the Ethereum merge. Stocks also fell Monday ahead of the Fed decision this week. Crypto prices are largely macro driven, and Coinbase’s revenue relies heavily on trading fees.
Theravance Biopharma — Theravance rallied more than 3% after announcing a $250 million stock buyback program.
Airlines — United Airlines, Alaska Air and American Airlines rose more than 3% and were among the best performers in the S&P 500 on Monday.
Gamco Investors — Shares of the Mario Gabelli-led investment firm plunged almost 12% after announcing after the bell on Friday it was voluntarily delisting from the New York Stock Exchange. Gamco has filed an application for its common stock to be quoted on the OTCQX platform, operated by OTC Markets Group.
Ralph Lauren — The luxury clothing and household goods maker rose almost 2% after an investor update pointed to high single digit sales growth.
—CNBC’s Alexander Harring, Sarah Min, Jesse Pound, Tanaya Macheel and Yun Li contributed reporting.
Passengers wait in line at the Spirit Airlines check-in counter at Orlando International Airport.
Paul Hennessy | LightRocket | Getty Images
Spirit Airlines relented this week and agreed to sell itself to JetBlue Airways for $3.8 billion, hours after breaking off a merger agreement with Frontier Airlines that failed to win enough shareholder support.
The new deal would mean big changes for travelers if it passes regulatory hurdles.
JetBlue has earned a reputation for passenger comforts like relatively generous legroom, seatback screens, live television, free Wi-Fi, and complimentary snacks like Cheez-Its and Stellar vegan butter pretzel braids. It also offers business class, with lie-flat seats.
Spirit, by contrast, has become a punchline for its bare-bones service. The cabins in its bright yellow planes are more cramped, and passengers have to pay extra for “optional services” like carry-on luggage and getting to pick a seat.
“It’s historic. This is the first time anyone wanted Spirit Airlines,” quipped “The Late Show” host Stephen Colbert about the deal on Thursday.
Still, Spirit has expanded rapidly and profitably by offering cheap tickets to vacation hotspots that can sometimes run less than a trip to the movies or a few burgers. The airline’s “Big Front Seat,” however, does offer 36 inches of legroom for a surcharge of up to $250.
As the two distinct airlines push ahead with their plans to combine, here’s what passengers can expect:
What are JetBlue’s plans for Spirit?
JetBlue wants to get bigger, and Spirit has the planes and pilots to help it do that. The New York-based carrier plans to retrofit Spirit’s planes in JetBlue’s style, ripping out the packed-in seats for a roomier layout with more amenities.
Combined, the airlines would become the country’s fifth-largest carrier, behind American, Delta, United and Southwest. Both have a big presence in Florida and each has expanded into Central and South America as well as the Caribbean in recent years. JetBlue last year started flying to London.
The two carriers will continue to operate as separate airlines until after the deal closes, which is subject to regulatory approval. Afterward, passengers might be confused if they’re flying in Spirit planes that haven’t been retrofitted yet.
JetBlue has some experience with such situations through its alliance with American in the Northeast, which allows the carriers to sell seats on each others’ planes. Last year, JetBlue revamped its website to better highlight the differences in onboard features like business class seats or free Wi-Fi.
Despite comedians’ digs, Spirit has improved its reliability in recent years — and is faring better than JetBlue by some measures.
JetBlue came in last among 10 airlines in on-time arrivals this year through May, while Spirit ranked seventh, according to the Transportation Department’s latest available data.
So far this year, a third of JetBlue’s flights were delayed and 4% have been canceled, according to flight tracker FlightAware. By comparison, slightly more than a quarter of Spirit’s flights have arrived late and 2.7% have been canceled.
JetBlue’s CEO Robin Hayes says improving reliability is a priority. The carrier has scaled back growth plans, saying it did not want to overextend its crews and other resources.
“A bigger JetBlue that is late is not a better JetBlue,” said Henry Harteveldt, a former airline executive and founder of Atmosphere Research Group, a travel-industry consulting firm.
Is this the end of cheap fares?
The Biden administration has vowed to take a tough stance on both consolidation and inflation, so the disappearance of an ultra low-cost airline could be a tough sell.
“Spirit might not be an elegant experience, but they are cheap,” said William Kovacic, a professor at the George Washington School of Law and a former chair of the Federal Trade Commission. “If they disappear as an independent enterprise … is that going to remove a source of downward pressure on price?”
But JetBlue’s Hayes says the airline needs to grow quickly and better compete with big airlines that control more than three-quarters of the U.S. market. Hayes argues a bigger JetBlue would mean more relatively lower fares to more destinations.
Like some of the airline giants, JetBlue has already added certain low fares that mimic carriers like Spirit. Those tickets also don’t come with seat assignments or other perks that were once standard with a coach fare.
But JetBlue’s business model of offering more comforts costs more than Spirit’s, meaning it likely won’t offer as many of the rock bottom fares that Spirit does.
Frontier Airlines, meanwhile, is already saying it’s happy to take on a bigger share of the ultra-low-cost market after its Spirit deal fell apart. Shortly after the airlines announced the end of their agreement, Frontier projected it would grow 30% next year and started a fare sale with 1 million seats going for $19 apiece.
The airline will become the largest discount carrier in the U.S. if Spirit is ultimately acquired. Others include Allegiant and Sun Country.
“That just gives us a huge amount of breathing room for growth,” said Frontier CEO Barry Biffle. “That’s why this is such a windfall for our employees and our shareholders.”
When is this happening?
Not immediately. JetBlue and Spirit expect the deal won’t get regulatory approval until late 2023 or early 2024, then close in the first half of 2024.
Integrating airlines is a lengthy and costly process. For example, United and Continental flight attendants didn’t even fly together until eight years after those airlines merged in 2010.
Retrofitting planes can take years too, and JetBlue wouldn’t be able to start that process with Spirit’s fleet until at least 2025. But the airline notes it recently outfitted more than 100 of its Airbus planes with new interiors.
“We’ve got a lot of recent experience in how to do it,” said Hayes.
LaGuardia International Airport Terminal A for JetBlue and Spirit Airlines in New York.
Leslie Josephs | CNBC
JetBlue Airways reached a deal to buy Spirit Airlines, hours after the discount carrier scrapped plans to merge with Frontier Airlines.
JetBlue said it will pay $33.50 a share in cash for Spirit in a $3.8 billion deal.
A JetBlue acquisition of Spirit would create the country’s fifth-largest carrier, and if approved by regulators, would leave Frontier as the largest discount carrier in the U.S.
JetBlue’s surprise, all-cash bid for Spirit in April had thrown Spirit’s plan to combine with fellow discounter Frontier into question. For months, Frontier and JetBlue competed for Spirit, each sweetening their offers, until the original merger plan fell apart earlier Wednesday, clearing the way for JetBlue.
Spirit said it planned to continue talks to sell itself to JetBlue after ending the Frontier agreement.
JetBlue executives have argued for months that buying Miramar, Florida-based Spirit would help it compete with large carriers like American, Delta, United and Southwest, which control most of the U.S. market, and fast-track its growth by giving it access to more Airbus jetliners and pilots, both of which are in short supply.
New York-based JetBlue wants to refurbish Spirit’s planes in JetBlue style, featuring seatback screens and more legroom.
Spirit previously rebuffed JetBlue’s bids and said such a deal wasn’t likely to be approved by regulators, in part because JetBlue’s alliance with American, which the Justice Department sued to block last year.
The deal faces a high hurdle for regulatory approval.
Spirit shares were up more than 4% in premarket trading after the deal was announced, while JetBlue was up 0.5%.
