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July 18, 2024

Appeals Court Sets Expedited June Hearing for Blocked JetBlue-Spirit Airlines Merger

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Feb 3, 2024

A federal appeals court has set an expedited schedule to hear arguments in June on overturning the blocked $3.8 billion merger between JetBlue Airways and Spirit Airlines. The Department of Justice (DOJ) sued to block the deal over antitrust concerns, arguing it would lead to higher fares, but both airlines vow to continue pursuing options to fight the decision and complete the merger.

DOJ Wins Initial Ruling Blocking JetBlue-Spirit Tie-Up

In early January, the DOJ won a preliminary injunction from a federal judge blocking the merger. The government argued that combining JetBlue and Spirit would reduce competition and lead to higher airfares, especially on overlapping routes in major cities like New York and Fort Lauderdale.

JetBlue CEO Robin Hayes said the airline “strongly disagrees” with the preliminary ruling blocking the tie-up with Spirit and would pursue “all options” to complete the merger.

Airlines Seek Expedited Appeal to Overturn Ruling

Both JetBlue and Spirit have now filed an expedited appeal in the First Circuit Court of Appeals seeking to overturn the lower court ruling. The First Circuit has agreed to an aggressive schedule, with legal briefs due in March and April, and oral arguments slated for the week of June 5th, according to a court order issued Thursday.

“We look forward to making our case to the appellate court and remain confident the merger will create more competition, more choices for customers, improved job security for crewmembers, and more opportunities for communities we serve,” said a JetBlue spokesperson.

A ruling from the appeals court is expected by early July at the latest. Both JetBlue and Spirit say they remain committed to completing the merger and believe they will prevail.

We have no basis to terminate the merger agreement with Spirit based on the district court’s ruling and decision,” said Scott Laurence, Head of Revenue and Planning at JetBlue.

Timing Critical for Shareholders as Conditions Threaten Deal

However, the lengthy appeals process and ongoing court fight has created uncertainty for shareholders. Spirit has set a new deadline of February 26 for investors to vote on the merger under the current terms.

If the deal collapses, analysts say Spirit lacks a long-term path as an independent low-cost carrier competing against rivals like Frontier. Its share price has plunged 15% since the DOJ first moved to block the merger in September.

“Spirit shareholders are facing tremendous uncertainty from not only merger delays but also operational meltdowns that are annihilating revenue,” said aviation industry analyst Samuel Engel. “The fast-track court schedule provides a glimmer of hope but time is running out.”

The drawn-out appeals process also creates financial and operational uncertainty for JetBlue as it charts a path forward with or without Spirit.

JetBlue Pursues Cost Cuts, New Routes if Merger Falters

In an earnings call last week, JetBlue executives outlined cost-savings plans and routes under consideration if the tie-up with Spirit ultimately fails.

JetBlue reported a $104 million Q4 loss, blamed partially on merger-related costs, and projects reduced capacity growth this year. It aims to cut $150-200 million in structural costs through moves like optimizing aircraft scheduling.

The airline is also considering growth opportunities by using new longer-range Airbus jets to launch routes like New York to London or deep South America, according to Hayes. However, analysts say JetBlue lacks a strong path for expansion or partnerships without Spirit’s footprint.

“JetBlue is going to be landlocked in the northeast part of the country without Spirit’s network,” said aviation consultant Mike Boyd. “The DOJ has created a real mess here that will lead to job losses and less competition.”

Court Fight Creates Uncertainty Across Industry

The court battle between JetBlue/Spirit and the DOJ is seen as a test case for the Biden Administration’s more aggressive stance policing mergers. Analysts say it is already creating ripple effects of uncertainty across industries.

  • The blocked JetBlue deal closely followed the DOJ suing to halt Penguin Random House’s purchase of Simon & Schuster. That case is also headed to appeal after an initial ruling against the publishers.

  • Analysts argue the string of failed mergers destroys shareholder value and leads companies to pull back on expansion plans impacting jobs.

“The court rejecting mergers based on hypothetical concerns sets a dangerous precedent that will dampen growth and innovation across the economy,” said free-market advocacy group Freedom Partners spokesman Bill Hammond. “Rather than suing to block deals proactively, regulators should closely monitor impact after completion using existing powers.”

However, DOJ antitrust chief Jonathan Kanter argues robust merger enforcement protects jobs and consumers from price gouging. Analysts say the coming court rulings in both the JetBlue/Spirit and Penguin Random House cases will shape Biden Administration antitrust policy going forward.

This story is developing rapidly and further updates will be provided as events unfold around the legal fight over the fate of the proposed Spirit/JetBlue merger.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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