JetBlue Merger With Spirit Airlines Blocked

Daniel Fowkes
17 Jan 2024
· Airlines 
Jetblue's planned merger with Spirit Airlines has officially been rejected following a trial over fears of the impact to consumers.

JetBlue’s merger with Spirit has officially been blocked after much deliberation and a lengthy trial.

Merger Blocked

In July 2022, JetBlue and Spirit announced their intent to come together and merge. It was a decision that ultimately followed previous attempts by Frontier to merge with Spirit.

These merger aspirations saw a three-way battle for acquiring Spirit. Eventually, JetBlue outbid Frontier. However, there were immediate concerns around the regulatory process that would lead to what the pair hoped would be approval.

Consolidation within any market will always be closely inspected by watchdogs who determine whether a tie-up will negatively affect the industry, competition and consumers.

The judge overseeing a lengthy court case towards the backend of 2023 has blocked the deal from taking place. This merger has been completely ruled off.

The official documentation noted that the combined JetBlue and Spirit would put more competition on the larger airlines in a post-merger world. However, there would be catastrophic impacts to consumers who rely heavily on the low-cost model of Spirit. The belief is this would be harmed.

Therefore, such a merger violates the Clayton Act. As these plans close, this will result in a significant breakup fee for Spirit on JetBlue’s part. JetBlue says it’s currently assessing the verdict and will decide its next course of action from there.

Spirit Tumbles

Following immediate news of JetBlue’s acquisition of Spirit being blocked, Spirit stock tumbled, with the company losing more than half of its value in 30 minutes, which indicates how much reliance there was on this takeover going ahead.

Spirit Airlines stock tumbles more than 50% within 30 minutes following the merger rejection verdict.

While there were onlookers not in favour of such a merger, those equally understood how important this would’ve been for Spirit as a company to ensure long-term survival.

The District Judge handling the case said while Spirit isn’t the largest airline in the United States, it is an airline that people love, and for its dedicated customers, there’s a reason why they choose Spirit. If this company were to get absorbed by JetBlue, the judge believes there would be massively negative ramifications on its customer base.

Ultimately, following a rejection, there are visible concerns for the future of Spirit, which has been struggling for several years to turn over positive results. If JetBlue was seen as the saving grace for Spirit, while consumers love them per the District Judge’s ruling, what is now next and is that relevant if Spirit can’t survive long-term?

Ambition To Become A Big Four

As part of JetBlue’s planned merger with Spirit, the ambition was to work its way into the Big Three airlines within the United States and make it a Big Four.

While ambitious, the airline believed that through this acquisition, it would be able to compete better against rivals that currently dominate the U.S. industry. The District Judge agreed on this stance. However, the overall impact on consumers at the loss of Spirit was highlighted mainly as a problem.

While JetBlue saw Spirit as a way out, some onlookers and analysts believed an acquisition would’ve seriously impacted the company, ultimately with a strong financial burden. JetBlue’s stock has lifted following today’s rejected merger.

Concerns Always Over Mergers

However, JetBlue and Spirit’s merger isn’t the only one rejected in recent years and isn’t the only ongoing consolidation.

Following the pandemic, airlines have looked to consolidate in markets with the belief of solid benefits to come. For some companies, this was also viewed as a way out from the financial pressures or lack of a visible long-term future in the industry.

Currently, Asiana Airlines and Korean Air are looking to tie up a long-discussed merger and have slowly but surely been obtaining approval from the necessary regulators.

However, within the United States, consolidation has been much harder to get approved. While some were excited about the prospective JetBlue and Spirit merger, most were concerned if this would be approved.

Looking ahead, Alaska Airlines will takeover Hawaiian Airlines, however, in similar fashion this deal will be subject to approval first as well.

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