JetBlue Airways and Spirit Airline have officially terminated their proposed $3.8 billion merger following a federal judge’s decision to block the deal. The judge expressed concerns about potential negative impacts on consumers who rely on Spirit’s lower fares.
Despite both companies initially supporting the merger, JetBlue’s CEO, Joanna Geraghty, acknowledged the challenges in meeting closing conditions before the July 24 deadline. Geraghty described the merger as a bold attempt to disrupt the industry, but with the federal court ruling and ongoing opposition from the Department of Justice, the likelihood of obtaining approval became extremely low.
Spirit Airlines CEO Ted Christie expressed disappointment over the failed merger, emphasizing the missed opportunity to create a new competitor against the nation’s four largest airlines. However, he remains confident in Spirit’s ability to succeed independently, even though the airline has been facing financial losses since the onset of the pandemic.
The Justice Department had filed a lawsuit against the merger, arguing that it would reduce competition and lead to increased fares, particularly for travelers relying on Spirit’s low-cost model. In January, a federal district judge in Boston sided with the government, stating that the deal violated antitrust law.
Attorney General Merrick Garland celebrated the decision by JetBlue as a victory for American consumers, emphasizing the Department of Justice’s success in proving that the merger would have resulted in higher fares and fewer choices for millions of travelers.
The collapse of the deal raises questions about Spirit Airlines’ future, given its financial challenges and the impending debt payments while dealing with grounded planes due to engine problems. Unlike larger airlines adapting to the post-pandemic landscape, Spirit has struggled to recover, reporting losses of $447 million in 2023 and $1.9 billion since the start of 2020.
Analysts have also questioned the financial sense of the deal for JetBlue, which has faced losses amounting to $2.2 billion since 2020. However, with revenue about 80% higher than Spirit’s, JetBlue possesses a more substantial cushion against financial setbacks. Activist investor Carl Icahn recently acquired nearly 10% of JetBlue stock and secured two seats on the airline’s board.
This development has implications beyond the individual airlines involved. It draws attention to the Biden administration’s stance against consolidation in various industries, evidenced by its opposition to the JetBlue-American Airlines partnership earlier. Furthermore, the failed merger prompts consideration of the viability of other proposed deals in the airline industry, such as Alaska Airlines’ intended purchase of Hawaiian Airlines.
Shares of Spirit Airlines dropped 11%, marking a more than 60% decline since the federal judge’s ruling against the merger in January. Conversely, JetBlue Airways saw a 4% rise in its shares.
In the termination of the JetBlue-Spirit merger underscores the complexities and challenges in the airline industry, with broader implications for the competitive landscape and the financial future of the involved carriers.
