US judge blocks JetBlue from acquiring Spirit Airlines

BOSTON, (Reuters) - A federal judge yesterday blocked JetBlue Airways’ JBLU.O planned $3.8 billion acquisition of ultra-low-cost carrier Spirit Airlines SAVE.N after agreeing with the U.S. Department of Justice that the deal was anticompetitive and would harm consumers.

The ruling by U.S. District Judge William Young in Boston marked a victory for the White House in its efforts to prevent further concentration of the U.S. airline industry and raises questions about the viability of another recently proposed deal, Alaska Air’s ALK.N planned acquisition of Hawaiian Airlines HA.O.

President Joe Biden, who has made boosting airline competition a top priority, called the ruling “a victory for consumers everywhere who want lower prices and more choices.”

The court’s ruling finding the deal violated U.S. antitrust law also called into question Spirit’s future. The ultra-lowcost carrier has struggled to turn a profit amid a run-up in operating costs and persistent supply chain problems.

Spirit’s shares closed down about 47% on Tuesday after the ruling was issued, while JetBlue shares ended about 5% higher.

Young said that while a combined JetBlue-Spirit would likely place “stronger competitive pressure” on larger carriers that dominate the domestic airline market, “the consumers that rely on Spirit’s unique, low-price model would likely be harmed.”

He said the deal would eliminate Spirit’s low fares and its ability to put pressure on other higher-priced airlines, including JetBlue, to cut prices. Rivals on average cut prices 7% to 11% when Spirit enters a market, he said.

“The government has demonstrated that consumers value Spirit flights as a unique, economical product option,” Young wrote. “The removal of Spirit as an option for consumers, therefore, would constitute a cognizable harm.”

U.S. Attorney General Merrick Garland called the ruling “a victory for tens of millions of travelers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward.”

While Young ruled in the Justice Department’s favor, he did not go as far as the government had asked and broadly bar any combination of the two companies, saying he was only going to block the deal “as it currently stands.”

The judge, who at trial had questioned whether further asset divestitures could make the deal work, said “the courthouse doors remain open should the defendant airlines decide to try again.”

Some investors and analysts in the past had expressed concerns that Spirit’s troubles could hurt JetBlue after the merger. Some analysts had also suggested JetBlue renegotiate the deal, citing the fall in Spirit’s share price even before Tuesday’s ruling.