JetBlue Officially Terminates Spirit Airlines Merger

JetBlue has formally announced the cancellation of plans to merge with Spirit Airlines following an initial rejection and concerns.

JetBlue has formally announced it’ll break up existing plans to merge with Spirit Airlines in a landmark move for the U.S. airline and the broader aviation industry.

A judge within the United States rejected a merger in the first month of the calendar year as concerns were present over the impact it’d have on consumers.

This rejection was a massive blow to the deal, with any attempts to turn around the stance leading to substantial costs and resources. Immediately, while an appeal was said to be lodged, there was much uncertainty on how much JetBlue would look to push the appeal.

Spirit Airlines was viewed as the company that was pushing the merger more than JetBlue, as analysts believed this low-cost airline needed a tie-up more than ever. Meanwhile, for JetBlue, some viewed a merger rejection as a more positive development.

Either way, there was a firm belief that even with an appeal overturning the ruling, it would be complicated, with the CEO informing employees that the chance was extremely low and thus not worth pursuing.

A total of USD 69 million will now be paid to Spirit Airlines by JetBlue as essentially a breakup fee. However, it’ll merely be a consolation for a troubled airline struggling significantly to turn around its fortunes.

Consolidation In Aviation

Consolidation within the aviation industry presents fantastic opportunities for companies looking to boost each other higher. However, such deals are equally heavily scrutinised with a significant focus on customer impact.

For example, will such a deal mean that competitors will struggle to survive, will airfares rise, and will it generally harm consumers? If these core principles are identified, if a merger goes ahead, then there’ll be calls for the deal to be rejected.

In the case of JetBlue and Spirit Airlines, this is what happened. The logic behind the rejection was that if a merger went ahead, the low-cost fares made available by Spirit would cease to exist as Jetblue’s philosophy would take over.

Struggles At Spirit Airlines

Spirit has always stood by operating a business model that positively impacts customers with cheap airfares. However, equally, it’s a business model that has struggled to turn a profit.

Spirit has recorded losses continuously for some time, and internally at Jetblue, alongside analysts, this was an apparent cause for concern.

Without JetBlue’s intervention or potential consolidation elsewhere, there are very valid concerns about the future of Spirit Airlines and whether it can survive the long-term challenges the industry will present without turning routine profits.

The shares of Spirit rapidly dropped amid the formal news from JetBlue of a merger breakup, and now analysts are concerned that the bankruptcy talk will arise again. The low-cost unit will ultimately face an uphill battle to turn around its fortunes and hope to become profitable.

Daniel Fowkes
05 Mar 2024
· Airlines 

Leave a Reply

  1. I called it when it was first announced. Both airlines are based out of Fort Lauderdale, Florida and the new company would had a huge market advantage over competitors. For once, the Federal Trade Commission did the right thing in opposing the merger. I suppose Spirit could re-start talks with low cost competitor Frontier Airlines to save itself.

    1. Post
      Author

      Consolidation always gets put under such a fine microscope, and for sure, it wouldn’t be easy in the U.S.

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