JetBlue Airways and Spirit Airlines said Monday they would walk away from their planned $3.8 billion merger after federal antitrust regulators successfully challenged the deal in court. JetBlue said it would pay Spirit $69 million to get out of the deal.
A federal judge in Boston blocked the proposed merger on Jan. 16, siding with the Justice Department when he found that the merger would reduce competition in the industry and give airlines more leeway to raise ticket prices. Judge William G. Young of the U.S. District Court for the District of Massachusetts noted that Spirit plays a critical role in the market as a low-cost airline and that travelers would have fewer options if JetBlue took over.
“We are proud of the work we have done with Spirit to create a vision to challenge the status quo, but given the remaining hurdles to closure, we collectively decided that the interests of both airlines would be better served “is when we move forward independently,” JetBlue's chief executive, Joanna Geraghty, said in a statement on Monday. “We wish the entire Spirit team all the best for the future.”
JetBlue and Spirit appealed Judge Young's decision. JetBlue filed a notice of appeal last week arguing that the deal should go ahead.
But in a Jan. 26 regulatory filing, JetBlue said it may terminate the deal. Spirit said in its own filing the same day that it believed there was “no basis for terminating” the agreement.
The merger agreement, which expired on January 28th, could have been extended until July 24th under certain conditions. But JetBlue noted in its January filing that Spirit had failed to meet some of its obligations under the agreement, giving JetBlue the opportunity to walk away from it.
As part of the merger agreement, JetBlue agreed to pay Spirit and its shareholders $470 million in fees if the deal was blocked. Some legal experts said JetBlue may be poised to dispute the remainder of those charges by terminating the agreement.
Spirit is heavily indebted and last made a profit before the Covid-19 pandemic. Investors view a merger as a lifeline for the company. The company's stock price has lost more than half of its value since the ruling blocking the merger.
JetBlue shares rose on the same news, as investors view the end of the deal as a cost-saving measure.
A merger of the airlines would have given the combined company a larger market share, dominated by four airlines – American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.
Alaska Airlines has also announced plans to expand its airline. In December, the company announced it would acquire Hawaiian Airlines for $1.9 billion. This deal is also likely to attract the attention of the federal antitrust authorities.