A federal judge on Tuesday blocked JetBlue’s proposed $3.8 billion acquisition of Spirit Airlines, citing antitrust concerns over reduced competition and higher fares.
Judge Finds Deal Would Lessen Competition and Raise Prices
U.S. District Judge Eleanor L. Ross ruled that combining the third- and fifth-largest U.S. airlines would reduce competition and lead to higher fares for travelers (CNN, Barron’s). Spirit shares plunged over 50% on the news, while JetBlue stock climbed nearly 8% as investors cheered the failed deal (Fool).
The U.S. Justice Department sued to block the deal in September, warning that it would eliminate key competition in the budget airline market and drive up ticket prices. Six states and the District of Columbia joined the DOJ lawsuit (NY Times).
In her order, Judge Ross wrote that a combination of JetBlue and Spirit would “significantly reduce competition, risk imminent and future price increases, and significantly diminish service and capacity options for air travelers.” She concluded the deal was illegal under federal antitrust law.
| JetBlue | Spirit Airlines |
|---|---|
| Nation’s 6th largest airline | Nation’s 7th largest airline |
| Hubs in New York, Boston, Fort Lauderdale | Hub in Fort Lauderdale |
| Low-cost carrier model | Ultra low-cost carrier model |
A Blow to JetBlue’s Expansion Plans
The blocked deal is a major setback for JetBlue CEO Robin Hayes, who engineered the takeover bid as part of his growth strategy beyond the airline’s northeastern strongholds (CNBC). JetBlue was hoping to add Spirit’s extensive network in South and Central America and expand in midsize U.S. cities where Spirit already operates.
Spirit Airlines becomes an uncertain target going forward after its sale to JetBlue and previous planned merger with Frontier Airlines both failed on antitrust grounds. The ultra low-cost carrier has limited options left for buyers or partners (View from the Wing).
JetBlue said it was reviewing its options following the court decision and pointed to support from Spirit shareholders for the combination. But analysts say the airline faces long odds of reviving the deal through an appeal or negotiated settlement (WSJ).
Further Consolidation in Airline Industry Now Uncertain
The blocked JetBlue-Spirit merger throws cold water on expectations for further consolidation in the airline industry after a recent wave of deals, including Alaska Airlines’ $2.9 billion purchase of Virgin America in 2016. American Airlines also closed its $4 billion acquisition of US Airways in 2015.
Analysts say the Justice Department is now sending a message that additional mergers among the top U.S. airlines are unlikely to gain approval post-pandemic, when federal aid prevented failures. That could impact speculated deals such as a Frontier-Sun Country tie-up. But analysts say further consolidation among midsize regional carriers remains possible (Skift).
JetBlue and Spirit say they plan to continue operating as independent airlines in the wake of the judge’s ruling. JetBlue is focusing on its pending acquisition of smaller carrier Alaska Air’s regional flying business on the West Coast (Airline Weekly). But analysts say both JetBlue and Spirit face operational challenges from the merger distraction over the past year ([CAPA](https://centreforaviation.com/analysis/reports/jetblue-faces-growth-questions-after-blocked-spirit-deal-while-spirit- confronts-its-weak-business-model-642148)).
The court decision halting further consolidation leaves an industry still struggling with higher fuel costs and ongoing labor shortages. But travelers benefit from continued competition and choice, particularly among the largest U.S. budget carriers.
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