Frank Holmes, manager of the U.S. Global Jets UCITS ETF (JETS) comments on the news that US airline JetBlue will buy Spirit airline for $3.8 billion: “The JetBlue-Spirit deal implies less competition going forward in the airline space.
“Spirit was an aggressive price cutter, tapping into new markets for people who never flew before.
“This will stop after this deal. Frontier will be the only remaining ultra-low-cost carrier.
“Whenever oil has spiked, historically, consolidation occurs in the airline industry, and we are witnessing that again.
“The “new JetBlue” will have 9% U.S. market share and annual revenues of $11.9 billion.
“It will also compete with the top four big U.S. carriers, although that will take some time.
“To align all the labor contracts, get a unified operating certificate and reposition the fleet, the deal could take at least three years.
“Currently, the U.S. Global Jets ETF owns both JetBlue and Spirit Airlines, with around a 3% position in both. Since the initial JetBlue announcement (5/16), the stock has fallen 12%, while Spirit has gone up 26%. Net-net, we feel this deal has been a winner for JETS.”
