JetBlue and Spirit Airlines call off 38 billion merger over

JetBlue and Spirit Airlines call off $3.8 billion merger over antitrust hurdle

By David Shepardson and Aatreyee Dasgupta

WASHINGTON (Portal) – Budget airlines JetBlue Airways and Spirit Airlines terminated their $3.8 billion merger agreement on Monday, seeing no path forward after a U.S. judge blocked the deal in January over anti-competition concerns.

A successful deal would have created the fifth-largest airline in the United States and helped Spirit survive, but the deal has been on the rocks since a judge in Boston said it would harm consumers by reducing competition.

The decision is a victory for the Biden administration, which has taken a hard line against airline mergers and argues that the deal would increase ticket prices for consumers.

U.S. Attorney General Merrick Garland said JetBlue's decision was “another victory for the Justice Department's work on behalf of American consumers” and said the merger “would have resulted in tens of millions of travelers facing higher fares and fewer choices.” “

The government has used antitrust and other enforcement efforts to try to lower prices for U.S. citizens in several industries.

“Given the federal court ruling and continued opposition from the Justice Department, the likelihood of receiving the green light to proceed with the merger in the foreseeable future is extremely low,” JetBlue CEO Joanna Geraghty told employees in an internal memo seen by Portal has seen.

“Even if the ruling were overturned on appeal, we simply see no path to regulatory approval by the required July 24 deadline.”

Spirit CEO Ted Christie said in a statement: “We have determined that current regulatory obstacles will not allow us to complete this transaction under the merger agreement in a timely manner.”

Under the agreement, JetBlue will pay Spirit $69 million. While the merger agreement was in effect, Spirit shareholders received advance payments totaling approximately $425 million.

Without the JetBlue deal, Spirit, the seventh-largest U.S. airline, faces a difficult road ahead. The ultra-low-cost carrier has struggled with weak demand in its key markets and is trying to return to sustainable profitability. Some analysts even believe the company could face bankruptcy if it can't shore up its finances.

The story goes on

Spirit shares fell 14% in late morning trading, while shares of JetBlue, the sixth-largest U.S. airline, rose 4%.

The ruling by U.S. District Judge William Young concluded that the proposed deal could harm competition in the U.S. airline market and increase ticket prices.

That led JetBlue to express doubts about the future of its deal, saying it may not be able to meet certain conditions required under the agreement.

JetBlue decided not to appeal a separate ruling that found Northeast's partnership with American Airlines anticompetitive.

JetBlue, which raised baggage fees last month, said it was working on numerous near-term efforts to increase revenue by more than $300 million and said it was on track to achieve cost savings of $175 million to $200 million $75 million from its structural cost program and $75 million in maintenance savings through fleet modernization.

A judge in May sided with the Justice Department and six states in a lawsuit challenging the joint venture called the Northeast Alliance that American and JetBlue entered into in 2020 and their powers to operate flights to and from New York City and Boston consolidated and coordinated schedules and revenue pooling.

Spirit said it is taking steps to ensure the strength of its balance sheet and ongoing operations and has retained Perella Weinberg & Partners and Davis Polk & Wardwell as advisers.

(Reporting by Aatreyee Dasgupta in Bengaluru and David Shepardson in Washington; Editing by David Gaffen, Devika Syamnath, Arun Koyyur and Nick Zieminski)