Bay Area/ Oakland/ Transportation & Infrastructure
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Published on March 04, 2024
JetBlue and Spirit Take Flight Solo as $3.8 Billion Merger Deal Nosedives Amid Legal ChallengesSource: Google Street View

The big bet of combining blue-and-gray tailfins has officially crashed and burned, as JetBlue Airways and Spirit Airlines announced the termination of their $3.8 billion merger agreement. Following a hard-fought antitrust lawsuit that saw the Justice Department and several states, including California, challenge the would-be aviation marriage, the carriers are flying solo once more. The intended merger, which promised to reshape the budget travel landscape, was shot down by U.S. District Judge William Young in January, dealing an air pocket of a blow to the carriers' ambitions.

California's Attorney General Rob Bonta called the dissolution a "victory for California consumers," as reported by his office. According to the California Attorney General's Office, Bonta affirmed, "This merger would have meant higher prices and fewer choices for air travelers, and the stifling of the competitive economy that makes California vibrant and innovative." He celebrated that the court's decision upheld competition, particularly in an industry not known for its abundance of operators.

In an extraordinary downturn for Spirit's shareholders, the low-cost carrier saw its shares plunge nearly 11% to their lowest closing price ever at $5.76 per share on news of the deal's demise. JetBlue, meanwhile, experienced a lift, with stock prices rising over 4% to close at $6.75. According to a CNBC report, the end of the merger saga concludes what was once positioned as a fierce showdown with Frontier Airlines for the heart of Spirit.

JetBlue's newly appointed CEO, Joanna Geraghty, who took the helm amid the merger's legal turbulence, explained to staff that while their plan was to "shake up the industry status quo," the judicial and regulatory headwinds proved too formidable. In a note, Geraghty said, "However, 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." Despite the optimistic words, JetBlue's approach for Spirit has now been definitively grounded.

Spirit, facing its own set of challenges with the grounding of several Airbus planes due to engine defects, now steels itself to navigate the marketplace alone. Spirit CEO Ted Christie assured that the company is taking steps towards profitability, declaring, "Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business." Christie also noted that Spirit shareholders received $425 million in prepayments from JetBlue during the agreement, and that JetBlue will pay Spirit $69 million related to the agreement’s termination.