JetBlue Airways and Spirit Airlines have announced the termination of their merger agreement following a federal antitrust lawsuit loss. The CEOs of both airlines cited regulatory hurdles as the reason for ending the deal. The lawsuit, filed by the Justice Department, argued that JetBlue’s takeover of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares. The judge ruled in favor of the Justice Department, blocking the merger. JetBlue and Spirit had appealed the decision, but analysts did not expect a successful appeal.
The news of the merger termination was welcomed by the Justice Department, with Attorney General Merrick Garland stating that it was a victory for American consumers. Spirit’s shares dropped almost 11% following the announcement, while JetBlue’s stock closed more than 4% higher.
The attempted merger between JetBlue and Spirit began almost two years ago when JetBlue made an unsolicited bid for the budget carrier. JetBlue ultimately won shareholder approval to take over Spirit. JetBlue CEO Joanna Geraghty described the bid as a bold and courageous plan to shake up the industry status quo. However, with the court ruling and the Department of Justice’s opposition, the likelihood of the merger moving forward anytime soon is extremely low.
Geraghty, who recently took over as CEO, has been tasked with improving JetBlue’s operations and cutting costs. Activist investor Carl Icahn disclosed a nearly 10% stake in the airline on her first day as CEO and subsequently won two board seats. The prospective purchase of Spirit would have provided a boost for the struggling airline, which is currently facing grounding of its Airbus planes due to an engine defect.
With the merger off the table, Spirit must now address its financial problems independently. The company is working to refinance its debt and has projected revenue for the first quarter above analysts’ expectations. Spirit CEO Ted Christie expressed confidence in the company’s ability to operate as a standalone business and stated that Spirit shareholders received prepayments from JetBlue during the agreement.
This is not the first time JetBlue has attempted to merge with another airline to gain scale. The airline previously had a partnership with American Airlines, which was also challenged by the Justice Department and ruled as anticompetitive by a federal judge. However, there is a possibility of reviving the partnership by making adjustments to the agreement structure.
American CFO Devon May expressed openness to exploring new opportunities for a relationship with JetBlue. JetBlue did not immediately comment on the matter.
Overall, the termination of the merger agreement between JetBlue and Spirit Airlines marks a significant setback for both airlines. While JetBlue aimed to gain scale and compete with larger airlines, the regulatory hurdles and legal challenges proved insurmountable. Spirit now faces the challenge of addressing its financial problems independently, but remains optimistic about its future prospects. The aviation industry will continue to watch for any potential partnerships or developments in the wake of these events.
