It should be noted the author has heavy bias against the attempted merger. He is very against M&A and his goal here is to argue against those who are blaming the current DOJ's (and FTC's) strong anti M&A philosophy after it led to a bankruptcy for Spirit airlines.
Also as Matt states, the Spirit CEO did try to prevent the JetBlue takeover but his shareholders overrode that decision. Had the shareholders listened to the Spirit CEO they would have had a better chance of merger. Though as someone who followed the case, the DOJ's arguments seemed weak. I was surprised by the Judge's decision & confused by his report. Though I'll admit to be being biased in favor of the merger but no where near as extreme as Matt is.
It should also be noted that not only has Spirit's CEO said their previous methods of low cost airlines are not economical anymore, larger airline CEO's have also said that low cost airfare doesn't work anymore. Larger airlines have expanded to that area. Larger airlines only make profits because of credit card deals & upgrades.
-- Edit - a few other things skimming the article that seem to be left out. JetBlue did a lot of divestures & appeared to be willing to find a way to make this deal go through. Matt mentions the Spirit CEO saying they would not go bankrupt but that seems to be different then what I recall. The majority opinion was that Spirit was either going to merge with JetBlue or be in massive trouble. I recall the Judge even making note of the high possibility of bankruptcy in his decision.
He is unapologetically antitrust. The piece touches on all of the points you mention.
> What ensued was a bidding war between Frontier and JetBlue over Spirit Airlines. JetBlue raised their bid, and ultimately, shareholders and executives accepted the higher JetBlue offer. The result was exactly what the Spirit Board had predicted; the Antitrust Division sued in 2023 to block the JetBlue-Spirit deal. The law is the law.
> That’s not all. In 2024, during the trial over JetBlue’s proposed acquisition of Spirit, the judge directly asked Spirit executives if they would go bankrupt should the merger fail. The reason is that there’s a special loophole in merger law, such that if your firm would otherwise fail absent a merger, you can get special dispensation to sell your company even if such a sale would erode competition. And that makes sense, if the company goes out of business then there wouldn’t be competition anyway. So what did Spirit executives tell the judge? They said, no, we’re not a failing firm, we’ll be fine if the merger doesn’t happen.
> In other words, they turned down the Frontier merger and accepted JetBlue’s proposed illegal one to get more money. Then the executives misled the court or themselves on the firm's financial condition so they wouldn’t have to admit they had run the airline into the ground.
> So that’s the situation. But an additional question is as follows. Is the bankruptcy actually bad? Sure shareholders will get wiped out. Guess what? GOOD. They deserve it. They opted for an illegal deal instead of a legal one. Plus Spirit will keep flying as a competitive airline, at least for now. This particular kind of bankruptcy isn’t necessarily a bad thing, it just means you reorganize the creditor relationships but keep the entity as a going concern.
> Matt Stoller is the Director of Research at the American Economic Liberties Project. He is the author of the Simon and Schuster book Goliath: The Hundred Year War Between Monopoly Power and Democracy, which Business Insider called “one of the year’s best books on how to rethink capitalism and improve the economy.” David Cicilline, Chairman of the House Antitrust Subcommittee, has called Stoller’s work “an inspiration.” Stoller is a former policy advisor to the Senate Budget Committee.
I would say the majority of that touches on my 2nd paragraph where I mention what Matt says regarding the CEO encouraging to go with the Frontier deal instead of JetBlue deal but shareholders disagreed. I think Matt & I both agree the CEO was proven right here & shareholders didn't listen & suffered.
I did mention a few things I don't see in there. Also doing a quick Google search I'm questioning Matt's line about the CEO saying they would not go bankrupt.
> During the antitrust trial in Boston, Spirit CEO Ted Christie repeatedly told the court that the Florida-based carrier was in serious financial trouble and continued independence would not allow the carrier to be a “relevant” competitor to U.S. majors American Airlines, Delta Air Lines, Southwest Airlines and United Airlines. https://aviationweek.com/air-transport/airlines-lessors/anal...
I think that linked article also provides a much more realistic argument as to why blocking this M&A deal was the wrong decision:
> Young and the DOJ engaged in wishful thinking and approached the proposed JetBlue-Spirit merger through the prism of an outdated view of the U.S. airline market. Even if Spirit can move through the Chapter 11 bankruptcy protection process and emerge as a restructured carrier, it will look far different than the ULCC of the previous decade Young thought he was preserving.
> Spirit executives had already been talking about a “reimagination” of the model that would include premium-seating and bundled product tiers. ULCC Frontier Airlines is also moving into premium offerings, while newer entrants Avelo Airlines and Breeze Airways eschewed the no-frills concept from the start.
Keep in mind, the Frontier merger would’ve likely been approved and bankruptcy avoided. That was an option, but the path not taken willfully and knowingly. Hence why I disagree with Aviation Week’s opinion piece you cite. The bankruptcy was the cost of pursuing an unfavorable M&A partner (JetBlue vs Frontier), based on the evidence presented.
> CEO Christie was paid $3.8 million in a retention bonus a week before Spirit declared bankruptcy. He gets to keep it if he is still with Spirit in one year.
Not saying it makes it ok, just that no one wants to work at bankcrupt company as a CEO.
How about if you could get $8m working at some other company? Or $3.8m working half as a hard?
The question isn't if you or I would do it - it's what does it take to get this guy to do it. The answer is the same as it is for you or I - what are the alternatives.
Yea, I'll put my name on the absolute worst, most failing company on Earth for a sum of millions. This is their bonus from what I gather. Cherry on top.
I already have to act like a dog - and pretend I'm thankful - for considerably less. Woe be the executive that actually has to work for their food, I guess. Give me a break.
Imagine the sentiment of someone below the executive suite working for a bankrupt company. No golden parachute or nest egg. No influence. Now you understand everyone else.
There is some logic to retention bonuses at failing companies. The point is not to get "you" to work as CEO of the most failing company on Earth. It is to get someone that the board thinks is competent at rescuing the company to work there. If this person has such skills, they likely can go work somewhere less screwed up and make more money and/or have a less stressful job. Hence, you need to pay them to make up for the difference. You might argue with whether the CEO is the right person or is up to the task but if you do hire someone for the job, the compensation makes sense.
As for the non-executive workers, the more likely outcome is they get fired or lose benefits. This is because the company likely needs to shed costs really quickly and the biggest cost for most companies is payroll. This asymmetry of outcomes is stark and, quite frankly, sucks but the math checks out. Companies exist to create value and they will do what is needed to continue doing that. Compensation is not about fairness or putting food on the table. It is about what is required to help the company continue creating value.
The takeaway is to always have a sober assessment of your position. Take a look at the chessboard and figure out if you are a Queen or a pawn. Once you know where you stand, act accordingly.
Game theory is indeed a thing. Cool. Let's regroup: this thread started with 'no one wants to work at bankcrupt company as a CEO' - their spelling :)
Call it a strawman, but I'm absolutely certain plenty would be willing - if not thankful - for the opportunity. Even CEOs of successful businesses... if we want to reinforce systems. Nobody can until they get a chance.
Who doesn't love a good story, you know? Great risk comes great reward. Think of the type who becomes CEO, consider how they started. Where they may fall, either by grace or chance.
A company is about putting food on the table the moment it fails to, proverbially and not. I agree with you, we just play the game differently. Don't mistake my position for (in)experience or capability
Everyone has a plan until they get punched, some will do it for $20 million.
I think few interpreted it quite the opposite of what I meant. What I meant was if all things are equal no one would want to be CEO of a falling company. Clearly even the current CEO is willing to work for $3.8M.
Think of your job and imagine the same job at completely dysfunctional company or company with terrible engineering. It's a reasonable expectation to demand more in the second company.
That's kinda the point of the bonus, isn't it? If you otherwise would not want to, they give you more money to make it worth your while to stick around.
It should be noted the author has heavy bias against the attempted merger. He is very against M&A and his goal here is to argue against those who are blaming the current DOJ's (and FTC's) strong anti M&A philosophy after it led to a bankruptcy for Spirit airlines.
Also as Matt states, the Spirit CEO did try to prevent the JetBlue takeover but his shareholders overrode that decision. Had the shareholders listened to the Spirit CEO they would have had a better chance of merger. Though as someone who followed the case, the DOJ's arguments seemed weak. I was surprised by the Judge's decision & confused by his report. Though I'll admit to be being biased in favor of the merger but no where near as extreme as Matt is.
It should also be noted that not only has Spirit's CEO said their previous methods of low cost airlines are not economical anymore, larger airline CEO's have also said that low cost airfare doesn't work anymore. Larger airlines have expanded to that area. Larger airlines only make profits because of credit card deals & upgrades.
-- Edit - a few other things skimming the article that seem to be left out. JetBlue did a lot of divestures & appeared to be willing to find a way to make this deal go through. Matt mentions the Spirit CEO saying they would not go bankrupt but that seems to be different then what I recall. The majority opinion was that Spirit was either going to merge with JetBlue or be in massive trouble. I recall the Judge even making note of the high possibility of bankruptcy in his decision.
I think that the DOJ's (and FTC's) anti M&A philosophy is rather permissive and has been targeted at very large, dangerous mergers.
He is unapologetically antitrust. The piece touches on all of the points you mention.
> What ensued was a bidding war between Frontier and JetBlue over Spirit Airlines. JetBlue raised their bid, and ultimately, shareholders and executives accepted the higher JetBlue offer. The result was exactly what the Spirit Board had predicted; the Antitrust Division sued in 2023 to block the JetBlue-Spirit deal. The law is the law.
> That’s not all. In 2024, during the trial over JetBlue’s proposed acquisition of Spirit, the judge directly asked Spirit executives if they would go bankrupt should the merger fail. The reason is that there’s a special loophole in merger law, such that if your firm would otherwise fail absent a merger, you can get special dispensation to sell your company even if such a sale would erode competition. And that makes sense, if the company goes out of business then there wouldn’t be competition anyway. So what did Spirit executives tell the judge? They said, no, we’re not a failing firm, we’ll be fine if the merger doesn’t happen.
> In other words, they turned down the Frontier merger and accepted JetBlue’s proposed illegal one to get more money. Then the executives misled the court or themselves on the firm's financial condition so they wouldn’t have to admit they had run the airline into the ground.
> So that’s the situation. But an additional question is as follows. Is the bankruptcy actually bad? Sure shareholders will get wiped out. Guess what? GOOD. They deserve it. They opted for an illegal deal instead of a legal one. Plus Spirit will keep flying as a competitive airline, at least for now. This particular kind of bankruptcy isn’t necessarily a bad thing, it just means you reorganize the creditor relationships but keep the entity as a going concern.
https://www.economicliberties.us/matt-stoller/
> Matt Stoller is the Director of Research at the American Economic Liberties Project. He is the author of the Simon and Schuster book Goliath: The Hundred Year War Between Monopoly Power and Democracy, which Business Insider called “one of the year’s best books on how to rethink capitalism and improve the economy.” David Cicilline, Chairman of the House Antitrust Subcommittee, has called Stoller’s work “an inspiration.” Stoller is a former policy advisor to the Senate Budget Committee.
I would say the majority of that touches on my 2nd paragraph where I mention what Matt says regarding the CEO encouraging to go with the Frontier deal instead of JetBlue deal but shareholders disagreed. I think Matt & I both agree the CEO was proven right here & shareholders didn't listen & suffered.
I did mention a few things I don't see in there. Also doing a quick Google search I'm questioning Matt's line about the CEO saying they would not go bankrupt.
> During the antitrust trial in Boston, Spirit CEO Ted Christie repeatedly told the court that the Florida-based carrier was in serious financial trouble and continued independence would not allow the carrier to be a “relevant” competitor to U.S. majors American Airlines, Delta Air Lines, Southwest Airlines and United Airlines. https://aviationweek.com/air-transport/airlines-lessors/anal...
I think that linked article also provides a much more realistic argument as to why blocking this M&A deal was the wrong decision:
> Young and the DOJ engaged in wishful thinking and approached the proposed JetBlue-Spirit merger through the prism of an outdated view of the U.S. airline market. Even if Spirit can move through the Chapter 11 bankruptcy protection process and emerge as a restructured carrier, it will look far different than the ULCC of the previous decade Young thought he was preserving.
> Spirit executives had already been talking about a “reimagination” of the model that would include premium-seating and bundled product tiers. ULCC Frontier Airlines is also moving into premium offerings, while newer entrants Avelo Airlines and Breeze Airways eschewed the no-frills concept from the start.
Keep in mind, the Frontier merger would’ve likely been approved and bankruptcy avoided. That was an option, but the path not taken willfully and knowingly. Hence why I disagree with Aviation Week’s opinion piece you cite. The bankruptcy was the cost of pursuing an unfavorable M&A partner (JetBlue vs Frontier), based on the evidence presented.
Important info that's missing in this article:
> CEO Christie was paid $3.8 million in a retention bonus a week before Spirit declared bankruptcy. He gets to keep it if he is still with Spirit in one year.
Not saying it makes it ok, just that no one wants to work at bankcrupt company as a CEO.
Give me $3.8m and I’d be happy to.
How about if you could get $8m working at some other company? Or $3.8m working half as a hard?
The question isn't if you or I would do it - it's what does it take to get this guy to do it. The answer is the same as it is for you or I - what are the alternatives.
Yea, I'll put my name on the absolute worst, most failing company on Earth for a sum of millions. This is their bonus from what I gather. Cherry on top.
I already have to act like a dog - and pretend I'm thankful - for considerably less. Woe be the executive that actually has to work for their food, I guess. Give me a break.
Imagine the sentiment of someone below the executive suite working for a bankrupt company. No golden parachute or nest egg. No influence. Now you understand everyone else.
There is some logic to retention bonuses at failing companies. The point is not to get "you" to work as CEO of the most failing company on Earth. It is to get someone that the board thinks is competent at rescuing the company to work there. If this person has such skills, they likely can go work somewhere less screwed up and make more money and/or have a less stressful job. Hence, you need to pay them to make up for the difference. You might argue with whether the CEO is the right person or is up to the task but if you do hire someone for the job, the compensation makes sense.
As for the non-executive workers, the more likely outcome is they get fired or lose benefits. This is because the company likely needs to shed costs really quickly and the biggest cost for most companies is payroll. This asymmetry of outcomes is stark and, quite frankly, sucks but the math checks out. Companies exist to create value and they will do what is needed to continue doing that. Compensation is not about fairness or putting food on the table. It is about what is required to help the company continue creating value.
The takeaway is to always have a sober assessment of your position. Take a look at the chessboard and figure out if you are a Queen or a pawn. Once you know where you stand, act accordingly.
Game theory is indeed a thing. Cool. Let's regroup: this thread started with 'no one wants to work at bankcrupt company as a CEO' - their spelling :)
Call it a strawman, but I'm absolutely certain plenty would be willing - if not thankful - for the opportunity. Even CEOs of successful businesses... if we want to reinforce systems. Nobody can until they get a chance.
Who doesn't love a good story, you know? Great risk comes great reward. Think of the type who becomes CEO, consider how they started. Where they may fall, either by grace or chance.
A company is about putting food on the table the moment it fails to, proverbially and not. I agree with you, we just play the game differently. Don't mistake my position for (in)experience or capability
Everyone has a plan until they get punched, some will do it for $20 million.
I think few interpreted it quite the opposite of what I meant. What I meant was if all things are equal no one would want to be CEO of a falling company. Clearly even the current CEO is willing to work for $3.8M.
Think of your job and imagine the same job at completely dysfunctional company or company with terrible engineering. It's a reasonable expectation to demand more in the second company.
That's kinda the point of the bonus, isn't it? If you otherwise would not want to, they give you more money to make it worth your while to stick around.
Losses are socialized, profits and bonuses are privatized. That's how the current system is set up to work.
This is not an example of that..
How much of this bonus will be clawed back in bankruptcy proceedings ?
Who is footing the bill for the bankruptcy?
The owners of the company.
Yeah and at least some of the creditors.
A week after bankruptcy would have been too late…