JetBlue, Spirit Airlines Merger Blocked: Spirit Shares Tumble

A federal judge has blocked the acquisition of Spirit Airlines, Inc. SAVE by JetBlue Airways Corporation JBLU in a victory for the Justice Department which fought aggressively to block the deal, saying that the deal would raise the cost of airfare and reduce the number of flights available. Shares of Spirit Airlines tumbled following the court’s decision.

What Happened:

JetBlue had proposed a $3.8 billion purchase of Spirit, which would have resulted in the fifth-largest U.S. airline, a move that JetBlue argued was necessary for it to compete with larger airlines including Delta and American Airlines. JetBlue claimed that access to Spirit's similar fleet of Airbus planes would allow it to grow quickly despite current industry challenges including a deficit of planes and pilots.

The Justice Department alleged in its lawsuit that, "JetBlue's plan would eliminate the unique competition that Spirit provides—and about half of all ultra-low-cost airline seats in the industry—and leave tens of millions of travelers to face higher fares and fewer options."

U.S. District Judge William Young in Boston blocked the merger and said, “The consumers that rely on Spirit's unique, low-price model would likely be harmed.”

Why It Matters:

Spirit Airlines shares fell more than 50% following the court’s decision. The decision also raises doubts about the recently proposed deal between Alaska Air Group, Inc. ALK and Hawaiian Holdings, Inc. HA.

SAVE, JBLU Price Action: According to Benzinga Pro, Spirit Airlines shares are down 50% at $7.40, and JetBlue shares are up 4.8% at $5.12 at the time of publication.

Image: Erik Nikolai Halsteinrud from Pixabay