A successful transaction would have produced the fifth-largest carrier in the United States, potentially ensuring Spirit’s existence as it burns cash and battles with debt. However, the merger had been on the rocks since a Boston judge declared it would damage consumers by limiting competition.
The decision is a victory for the Biden administration, which has taken a hard line against aviation mergers and argued that the acquisition will raise consumer ticket prices.
President Joe Biden stated that the “merger would have forced higher fares and fewer choices on tens of millions of Americans” and that the decision to stop the merger was a “win for American consumers and competition.”
The government has utilized antitrust and other enforcement actions to try to lower prices in a variety of businesses.
The decision is a victory for the Biden administration, which has taken a hard line against aviation mergers and argued that the acquisition will raise consumer ticket prices.
President Joe Biden stated that the “merger would have forced higher fares and fewer choices on tens of millions of Americans” and that the decision to stop the merger was a “win for American consumers and competition.”
The government has utilized antitrust and other enforcement actions to try to lower prices in a variety of businesses.
“With the ruling from the federal court and the Department of Justice’s continued opposition, the probability of getting the green light to move forward with the merger anytime soon is extremely low,” JetBlue CEO Joanna Geraghty told employees in an internal note.
“Even if the ruling was overturned on appeal, we simply don’t see a path to regulatory approval by the required July 24 deadline.”
JetBlue executives privately expressed relief that the transaction had been blocked due to Spirit’s poor finances, according to a person familiar with the situation. If the firms won their antitrust case, JetBlue was considering terminating the deal with Spirit under a “material adverse change” clause in their contract, noting the latter’s downturn in fortunes, according to the source.
Spirit CEO Ted Christie said in a statement that “we concluded that current regulatory obstacles will not permit us to close this transaction in a timely fashion under the merger agreement.”
According to the agreement, JetBlue will pay Spirit $69 million. While the merger agreement was in force, Spirit investors received about $425 million in total prepayments.
Without the JetBlue merger, Spirit, the seventh-largest US carrier, faces a difficult road ahead. As it strives to restore to long-term profitability, the ultra-low-cost carrier has faced low demand in its major regions. Some analysts have even indicated that the corporation may declare bankruptcy if it is unable to shore up its finances.
Spirit shares fell 11% in late morning trade, while JetBlue, the sixth-largest US carrier, increased 4.3%.
U.S. District Judge William Young ruled that the proposed merger was likely to reduce competition in the US aviation market and potentially raise ticket costs.
JetBlue expressed concern about the viability of the partnership, stating that it may be unable to achieve certain conditions outlined in the agreement.
JetBlue declined to appeal a separate verdict that deemed its Northeast alliance with American Airlines anticompetitive.
JetBlue, which raised baggage fees last month, said it is working on numerous near-term initiatives to increase revenue by more than $300 million. It also said it is on track to deliver $175-200 million in cost savings from its structural cost program and $75 million in maintenance savings from fleet modernization.
In May, a judge ruled in favor of the Justice Department and six states in a lawsuit challenging the “Northeast Alliance,” a joint venture formed by American and JetBlue in 2020 to coordinate flights into and out of New York City and Boston, as well as pool income.
Spirit stated that it was taking steps to strengthen its balance sheet and continued operations and has recruited Perella Weinberg & Partners and Davis Polk & Wardwell as advisors.
