JetBlue and Spirit have announced they will be entering their $3.8 billion merger plan, after a judge blocked the takeover in January. Although the airlines appealed the decision, they would not be able to meet the agreement’s terms by the set deadline, so they are walking away from the deal.
The US Justice Department sued to block the merger last year on grounds of breaking antitrust laws. New York based JetBlue, a full-service airline, was planning to terminate Spirit’s low-cost model, which would have not only reduced affordable options for travellers, but would have also reduced price competition incentives for the country’s 4 largest airlines.
“Even if consumers don’t fly on low-cost carriers like Spirit, they help to keep fares lower by putting pressure on the legacy carriers”, said Katy Nastro of the travel site Going. “Cheap flight lovers across the board can breathe a bit easier.”
The airlines have said they still believed the merger was the right decision, but with a hearing for the appeal set for June and the deadline for their deal on 24 July, they backed out of the agreement. “With the ruling from the federal court and the Department of Justice’s continued opposition, the probability of getting the green light to move forward with the merger anytime soon is extremely low”, said JetBlue CEO Joanna Geraghty.
“Today’s decision by JetBlue is yet another victory for the Justice Department’s work on behalf of American consumers”, Attorney General Merrick Garland said in a statement on 4 March. “The Justice Department proved in court that a merger between JetBlue and Spirit would have caused tens of millions of travellers to face higher fares and fewer choices. We will continue to vigorously enforce the nation’s antitrust laws.”
JetBlue now has to pay Florida based Spirit $69 million for breaking the agreement. According to Travel Weekly, the former had already paid the latter’s stakeholders $425 million for the takeover. In early 2022, Spirit was planning on merging with Frontier Airlines, another low-cost carrier, a deal which would have likely met less resistance. However, JetBlue decided to outbid Frontier’s $2.2 billion offer and, despite warnings from Spirit’s management that the deal would not be approved by regulators, JetBlue bypassed management and appealed directly to Spirit’s stakeholders, according to AP.
Neither one of the airlines has managed to turn a profit since the pandemic, hoping the merger would provide a lifeline. Spirit lost $447 million last year, a 19.3% operating loss, and $1.9 billion since the start of 2020. JetBlue has lost $2.2 billion since 2020, ending 2023 with a 3.5% operating loss. Both of them have said they will continue operations independently for the moment, adopting a series of revenue initiatives. How that will turn out remains to be seen.
