WASHINGTON, D.C. – Two low-cost airlines, JetBlue Airways and Spirit Airlines, have decided to cancel their $3.8 billion merger agreement after facing challenges from a U.S. judge. The cancellation comes after the judge blocked the deal due to concerns about anti-competition practices.
The proposed merger, which would have created the fifth-largest carrier in the United States, faced criticism from both consumers and regulators. A Boston judge had previously expressed concerns that the merger would harm consumers by reducing competition in the industry, ultimately leading to higher ticket prices.
The Biden Administration, known for its tough stance against consolidation in the aviation sector, expressed support for the decision to cancel the merger. The administration has been actively working to protect consumers from rising prices and limited choices across various industries.
JetBlue CEO, Joanna Geraghty, acknowledged the challenges faced by the merger, stating that obtaining regulatory approval by the required deadline was highly unlikely. Additionally, Spirit Airlines CEO, Ted Christie, stated that regulatory obstacles prevented the timely completion of the transaction under the merger agreement.
In light of the cancellation, JetBlue will pay Spirit $69 million, with Spirit’s stockholders having received around $425 million in total pre-payments while the merger agreement was still in effect. Without the merger, Spirit Airlines, the seventh-largest carrier in the U.S., faces uncertainties in its path to financial stability.
Following the cancellation, Spirit Airlines saw a 14% drop in its shares, while JetBlue experienced a 4% increase. The decision by U.S. District Judge William Young to block the merger was based on concerns over potential competition issues and the impact on ticket prices.
JetBlue’s decision not to appeal a ruling regarding its Northeast partnership with American Airlines further underscores the challenges faced by the airline industry. With ongoing efforts to increase revenue and reduce costs, JetBlue remains focused on strengthening its position in the market.
Looking ahead, Spirit Airlines is taking steps to ensure the stability of its operations and financial health, with the support of strategic advisors. The cancellation of the merger agreement marks a significant development in the aviation industry, impacting the future strategies of both JetBlue Airways and Spirit Airlines.