JetBlue and Spirit Airlines Challenge Federal Judge’s Decision on Proposed Merger
On Friday, JetBlue Airways Corporation (JBLU) and Spirit Airlines Inc. (SAVE) confirmed that they are challenging a federal judge’s decision that prevents their proposed merger on antitrust grounds. The initial plan was for JetBlue to acquire Spirit for $3.8 billion, but a federal judge halted the merger, arguing that it would lead to the elimination of the budget airline and result in higher prices for cost-conscious customers.
Following the announcement of the appeal, Spirit’s shares soared over 10% in after-hours trading on Friday, while JetBlue’s shares saw a minor drop. JetBlue has now confirmed the appeal in line with the prerequisites of the merger agreement.
Judge William Young noted in his ruling that JetBlue aimed to reduce the number of seats on Spirit’s densely populated aircraft. He added that the removal of Spirit from the market would deprive cost-sensitive travelers of a choice. Before the court ruling, Spirit faced challenges such as declining travel demand, increased costs, and grounded planes due to a Pratt & Whitney engine problem.
The judge’s decision raised concerns among Wall Street analysts regarding Spirit’s ability to endure, causing a significant drop in the company’s stock shares. Spirit’s stock had plummeted over 60% after the initial ruling. It was previously reported that the budget airline was encouraging JetBlue to appeal the decision, as the merger was seen as necessary for JetBlue to compete with larger airlines. Access to Spirit’s similar fleet of Airbus aircraft would have allowed JetBlue to grow quickly despite industry challenges, including a shortage of planes and pilots.
President Joe Biden had praised the judge’s decision to block the merger, stating that it was a win for consumers seeking lower prices and more options. Despite the hurdles, Spirit plans to refinance its debt of over $1 billion, due in September 2025, and has a positive financial forecast. Meanwhile, the U.S. Department of Justice is set to examine another merger proposal between Alaska and Hawaiian Airlines.
The outcome of the appeal will determine the future of the proposed merger between JetBlue and Spirit Airlines. Both companies are determined to challenge the judge’s decision and move forward with their plans. As the aviation industry continues to recover from the impact of the COVID-19 pandemic, mergers and acquisitions play a crucial role in shaping the competitive landscape.
