JetBlue and Spirit end $3.8 billion merger plan
JetBlue Airways and Spirit Airlines are ending their proposed $3.8 billion merger weeks after a federal judge blocked the deal, saying it would hurt consumers who depend on Spirit’s lower fares.
JetBlue said Monday that even though both companies still believe in the deal, they were unlikely to meet the closing conditions required in the agreement before a July 24 deadline.
JetBlue’s new CEO, Joanna Geraghty, called the merger “a bold and courageous plan intended to shake up the industry status quo” and speed JetBlue’s growth.
“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,” Geraghty said in a memo to employees of the New York-based airline. She said uncertainty over the merger’s fate was distracting the airline from its effort to return to profitability.
Spirit CEO Ted Christie said he was disappointed that the airlines were blocked from creating a new challenger to the nation’s four biggest airlines but said he is confident that Spirit — which has been losing money since the pandemic started — can succeed on its own.
JetBlue will pay Miramar-based Spirit a $69 million termination fee.
The Department of Justice sued to block the merger last year, saying it would reduce competition and drive up fares, especially for travelers who depend on low-fare Spirit.
In January, a federal district judge in Boston sided with the government and blocked the deal, saying it violated antitrust law.
On Monday, the DOJ took a victory lap.
“Today’s decision by JetBlue is yet another victory for the Justice Department’s work on behalf of American consumers,” Attorney General Merrick Garland said in a statement. “The Justice Department proved in court that a merger between JetBlue and Spirit would have caused tens of millions of travelers to face higher fares and fewer choices. We will continue to vigorously enforce the nation’s antitrust laws.”
The airlines had appealed the ruling, and a hearing had been set for June in the 1st U.S. Circuit Court of Appeals in Boston.
The Biden administration’s Justice Department, which has fought against consolidation in several industries, previously killed a partnership between JetBlue and American Airlines on flights in New York and Boston.
Spirit and Frontier Airlines announced a $2.2 billion merger in early 2022 — a deal that would have combined two similar carriers that charge lower fares than the big airlines but add on fees that generate a large chunk of their revenue.
JetBlue jumped into the fray against the wishes of Spirit’s management, which warned that it would be difficult to win regulatory approval for a Spirit-JetBlue combination. JetBlue went over the heads of Spirit’s board, directly to Spirit’s shareholders, and won a bidding war against rival Frontier a few month later.
While the deal was taking shape and wound up in court, there were continuing losses and other problems at Spirit. In late January, JetBlue warned that it might terminate the agreement.
JetBlue has also been losing money and faces its own uncertain future. Activist investor Carl
Icahn bought nearly 10% of JetBlue stock last month and won two seats on JetBlue’s board.