JetBlue and Spirit cancel their merger

JetBlue Airways and Spirit Airlines announced Monday they would abandon their planned $3.8 billion merger after federal antitrust regulators successfully challenged the deal in court. JetBlue said it would pay Spirit $69 million to terminate the deal.

A federal judge in Boston blocked the proposed merger on Jan. 16, siding with the Justice Department in ruling that the merger would reduce competition in the industry and give airlines more leeway to raise ticket prices. The judge, William G. Young of the US District Court for the District of Massachusetts, noted that Spirit played a crucial role in the market as a low-cost airline and that travelers would have fewer options if JetBlue were to take over.

“We are proud of the work we have done together with Spirit to set a vision to challenge the status quo, but given the hurdles to closure that remain, we have decided together that the interests of both airlines would be better served by moving forward independently,” said JetBlue’s chief executive, Joanna Geraghty, said in a statement on Monday. “We wish all the best for the entire Spirit team.”

JetBlue and Spirit appealed Judge Young’s decision. JetBlue filed an appeal letter last week arguing that the deal should go forward.

But in a filing with regulators on Jan. 26, JetBlue said it could terminate the deal. Spirit said in its own filing the same day that it believed there was “no basis to terminate the agreement.”

The merger agreement, which expired on January 28, could have been extended until July 24 if certain conditions were met. But JetBlue suggested in its January filing that Spirit had failed to meet some of its obligations under the agreement, giving JetBlue the option to walk away.

As part of the merger agreement, JetBlue agreed to pay Spirit and its shareholders $470 million in fees if the deal was blocked. Some legal experts said JetBlue may have been positioning itself to dispute the rest of those fees by terminating the agreement.

Spirit is heavily indebted and last made a profit before the Covid-19 pandemic. Investors see a merger as a lifeline for the company. The stock price has lost more than half its value since the ruling blocking the merger.

JetBlue shares rose on the same news, as investors see the end of the deal as a cost-cutting measure.

A merger of the airlines would have given the combined company greater market share, which is dominated by four airlines: American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.

Alaska Airlines has also announced plans to increase its size. In December, it said it wanted to acquire Hawaiian Airlines for $1.9 billion. That deal is also likely to draw the attention of federal antitrust regulators.