JetBlue, Spirit end $3.8 billion merger agreement after losing antitrust suit

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A JetBlue Airways plane sits on the tarmac at the Fort Lauderdale-Hollywood International Airport on January 31, 2024 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images

JetBlue Airways and Spirit Airlines on Monday said they are ending their agreement to merge, weeks after losing a federal antitrust lawsuit that challenged the deal.

A federal judge in January blocked JetBlue’s attempted takeover of budget carrier Spirit after the Justice Department sued to bar the deal last year. The Justice Department alleged the acquisition would stifle competition in the airline industry and eliminate Spirit as a discount alternative for price-conscious travelers.

JetBlue and Spirit appealed the judge’s decision, but JetBlue noted the appeal was required under the terms of the merger agreement. Analysts had expected little chance of a successful appeal.

Spirit shares tumbled as much as 17% in premarket trading Monday, while shares of JetBlue were up roughly 4%.

Almost two years ago, JetBlue swooped in with an unsolicited bid for Spirit Airlines, which had weeks earlier struck a merger agreement with fellow budget airline Frontier. JetBlue ultimately won Spirit shareholder approval to take over the discount carrier.

“It was a bold and courageous plan intended to shake up the industry status quo, and we were right to compete with Frontier and go for an opportunity that would have supercharged our growth and provided more opportunities for crewmembers,” JetBlue CEO Joanna Geraghty said in a note to staff on Monday.

“However, 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,” she said.

JetBlue’s prospective purchase of Spirit would have been a buoy for the struggling discounter airline, which is facing the grounding of dozens of its Airbus planes for inspections stemming from a Pratt & Whitney engine defect. Spirit expects compensation from the engine-maker as a result of the flaw.

With the deal off the table, Spirit must confront its financial problems alone, something its leaders say it is equipped to do.

The company said it was working to refinance its debt, and last month said it was on a path back to profitability thanks to better-than-expected demand. It projected revenue for the first quarter above analysts’ expectations.

“Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the Guest experience,” Spirit CEO Ted Christie said in a release.

He said Spirit shareholders received $425 million in prepayments from JetBlue during the agreement, and that JetBlue will pay Spirit $69 million related to the agreement’s termination.

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