NY: JetBlue Terminates Merger Agreement with Spirit Airlines
New York-based airline JetBlue announced it would terminate its merger deal with ultra-low-cost airline Spirit, after a federal judge in January sided with the U.S. Justice Department's claim that the merger would “harm cost-conscious travelers who rely on Spirit’s low fares.”
By FrumNews.com
New York-based airline JetBlue announced it would not appeal and will terminate its merger deal with ultra-low-cost airline Spirit, after a federal judge in January sided with the U.S. Justice Department’s claim that the merger would “harm cost-conscious travelers who rely on Spirit’s low fares.”
Nearly two years ago, Jetblue gave an unsolicited offer to Spirit Airlines, which had just agreed to a merger with its rival ultra-cost carrier Frontier. Shareholders ultimately agreed to JetBlue’s offer of $3.6 billion or $33 per share.
Fast forward to March of last year, the Justice Department chose to fight the merger, seeking to block the acquisition under Section 7 of the Clayton Act, The Justice Department stated in its original complaint that “The merger would result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly.”
The airlines argued that they needed to combine to better compete with the larger “Big 4” airlines – American, United, Delta and Southwest, which control 80% of the domestic market share.
In January 2024, U.S. district judge William Young sided with the Justice Department and blocked the merger, stating in her decision, “JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”
This morning, JetBlue and Spirit jointly announced it would not seek an appeal against the January ruling, which experts said an appeal would have little chance to win.
Merrick B. Garland, the Attorney General, celebrated the termination, “Today’s decision by JetBlue is yet another victory. 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.”
“We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” said Joanna Geraghty, CEO of JetBlue. “We are proud of the work we did with Spirit to lay out a vision to challenge the status quo, but given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently. We wish the very best going forward to the entire Spirit team.”
The termination of the deal brings questions to both JetBlue and Spirit. Before the merger deal and after, Spirit has been in millions of dollars in debt and spending millions.
JetBlue, on the other hand, has not received what it wants – which is market expansion. The airline will now be bound to its unfavorable hubs on the east coast in New York, Boston and Florida, which the larger airlines compete heavely in.
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