JetBlue, Spirit end $3.8 billion merger agreement after losing antitrust suit (2024)

A JetBlue Airways plane sits on the tarmac at the Fort Lauderdale-Hollywood International Airport on January 31, 2024 in Fort Lauderdale, Florida.

Joe Raedle | Getty Images

JetBlue Airways and Spirit Airlines on Monday said they are ending their agreement to merge, weeks afterlosing a federal antitrust lawsuit that challenged the deal.

The CEOs of the two carriers cited regulatory hurdlesin ending their merger agreement.

A federal judge in January sided with the Justice Department and blocked JetBlue's attempted takeover of budget carrier Spirit. In his ruling, Judge William Young said JetBlue's takeover of Spirit would "harm cost-conscious travelers who rely on Spirit's low fares." The airlines had argued that they needed to combine to better compete with the larger airlines that control most of the U.S. market.

JetBlue and Spirit had appealed the judge's decision,but JetBlue noted the appeal was required under the terms of the merger agreement. Analysts had expected little chance of a successful appeal.

The Justice Department cheered the news on Monday, a year after it filed its suit to block the deal. "Today's decision by JetBlue is yet another victory for the Justice Department's work on behalf of American consumers," Attorney General Merrick Garland said in a statement.

Spirit's shares tumbled almost 11% on Monday to end the trading session at their lowest closing price on record, $5.76 per share, while JetBlue's stock closed more than 4% higher at $6.75.

Almost two years ago, JetBlue swooped in with an unsolicited bid for Spirit Airlines, which had weeks earlier struck a merger agreement with fellow budget airlineFrontier. JetBlue ultimately won Spiritshareholder approvalto take over the discount carrier.

"It was a bold and courageous plan intended to shake up the industry status quo, and we were right to compete with Frontier and go for an opportunity that would have supercharged our growth and provided more opportunities for crewmembers," JetBlue CEO Joanna Geraghty said in a note to staff on Monday.

"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," she said.

Geraghty took over as CEO from Robin Hayes last month, tasked with stopping JetBlue's losses, improving its operation and trimming costs. Activist investor Carl Icahn disclosed a nearly 10% stake in the airline on her first day, and days later won two board seats at the New York-based airline.

JetBlue's prospective purchase of Spirit would have been a buoy for the strugglingdiscounter airline, which is facing the grounding of dozens of its Airbus planes for inspections stemming from a engine defect. Spirit expects compensation from the engine-maker as a result of the flaw.

With the deal off the table, Spirit must confront its financial problems alone, something its leaders say it is equipped to do.

The company said it was working to refinance its debt, and last month said it was on a path back to profitability thanks to better-than-expected demand. It projected revenue for the first quarter above analysts' expectations.

"Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the Guest experience," Spirit CEO Ted Christie said Monday.

He said 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.

The Spirit deal wasn't JetBlue's first attempt at linking up with another airline to gain scale. It previously had a partnership with American Airlines in the congested Northeast U.S. to coordinate schedules and routes.

But last year a different federal judge sided with the Justice Department and knocked that partnership down, calling it anticompetitive. That ruling left open the possibility of tweaking the structure of the agreement and reviving it.

American appealed the ruling last year, but JetBlue did not, saying it would instead focus on its Spirit deal.

American CFO Devon May told reporters at an investor event on Monday: "We'll see what opportunities there are going forward of having a new relationship."

JetBlue didn't immediately comment.

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JetBlue, Spirit end $3.8 billion merger agreement after losing antitrust suit (2024)

FAQs

Did JetBlue and Spirit end their merger agreement? ›

JetBlue Airways and Spirit Airlines on Monday said they are ending their agreement to merge, weeks after losing a federal antitrust lawsuit that challenged the deal. The CEOs of the two carriers cited regulatory hurdles in ending their merger agreement.

Why did the JetBlue Spirit merger fail? ›

The ruling by U.S. District Judge William Young found the proposed deal was likely to hurt competition in the U.S. aviation market and could hike ticket prices. That prompted JetBlue to raise doubts over the future of its deal, saying it might be unable to meet certain conditions required as part of the agreement.

Why did judge Block Spirit JetBlue merger? ›

(Spirit). In January, the U.S. District Court for the District of Massachusetts blocked the transaction because it violated “the core principle of antitrust law: to protect the United States' markets – and its market participants – from anticompetitive harm.”

Will the Spirit and JetBlue merger be approved? ›

NEW YORK--(BUSINESS WIRE)-- JetBlue (NASDAQ: JBLU) today announced that it has reached an agreement with Spirit Airlines (NYSE: SAVE) to terminate their July 2022 merger agreement.

Why did the JetBlue merger get cancelled? ›

The Justice Department sued to block the merger last year, saying it would reduce competition and drive up fares, especially for travelers who depend on low-fare Spirit. In January, a federal district judge in Boston sided with the government and blocked the deal, saying it violated antitrust law.

Who is JetBlue owned by? ›

The company's most prominent individual shareholders are Robin Hayes, Joanna Geraghty, and Brandon Nelson. JetBlue is also heavily owned by institutional firms like BlackRock Inc., Vanguard Group Inc., and Dimensional Fund Advisors LP.

Is Spirit Airlines going out of business in 2024? ›

12, 2024. Spirit Airlines CEO Ted Christie said Friday that the budget airline isn't considering a Chapter 11 bankruptcy filing and is “encouraged” by its plan after a failed takeover by JetBlue Airways .

Does JetBlue owe Spirit money? ›

In that regard, Spirit has retained Perella Weinberg & Partners L.P. and Davis Polk & Wardwell LLP as advisors. As part of the termination, JetBlue will pay Spirit $69 million. While the merger agreement was in effect, Spirit stockholders received approximately $425 million in total prepayments.

Is JetBlue in financial trouble? ›

Moody's downgraded JetBlue's corporate family rating to "B3" from "B2", stating that restoring the company's operating profit and cash flow to levels that would lead to materially stronger credit metrics would require several years. It expects the airline to burn $2.2 billion in cash in 2024 and $1.4 billion in 2025.

Did JetBlue terminate the $3.8 BN deal to buy Spirit Airlines? ›

A federal judge has blocked JetBlue Airways' $3.8bn takeover of the budget carrier Spirit Airlines, agreeing with the US Department of Justice that the deal would knock competition and limit the availability of low-priced tickets.

Why can't JetBlue buy Spirit? ›

The decision comes in the wake of a federal court ruling blocking the deal from taking place on antitrust grounds. The Justice Department had argued that airfares could go up if Spirit was no longer an independent airline.

Is Spirit Airlines in financial trouble? ›

Spirit Airlines warned that its second-quarter loss would be more than expected, and revenue would fall short of its previous outlook. The company blamed the worse numbers on less-than-anticipated non-ticket revenue. The news sent Spirit Airlines shares to an all-time low.

Why did Spirit and JetBlue's merger fail? ›

JetBlue and Spirit said there were too many regulatory and legal challenges to close the acquisition, but asserted the merger would have challenged the dominance of the four major airlines in the U.S. — American, Delta, United, and Southwest.

Did JetBlue cancel the Spirit deal? ›

JetBlue and Spirit Airlines cancel $3.8bn merger after judge blocked deal. Low-cost air carriers JetBlue Airways and Spirit Airlines canceled their $3.8bn merger agreement on Monday, seeing no path forward after a US judge blocked the deal in January on anti-competition concerns.

Is JetBlue part of Delta? ›

While they are not part of the same network, New York-based JetBlue (JBLU) is offering to extend its TrueBlue loyalty program to Delta Air Lines (DAL) 's SkyMiles Medallion members.

How much is the termination fee for JetBlue merger? ›

JetBlue and Spirit have terminated their $3.8 billion merger agreement. Under the arrangement, JetBlue will pay Spirit a $69 million termination fee. JetBlue had already paid Spirit shareholders $425 million in prepayments for the planned acquisition, which was blocked by a federal court in January.

Will JetBlue stock go up after merger? ›

In a regulatory filing on Monday, JetBlue acknowledged that its indebtedness following the merger will be substantially higher and could increase borrowing costs. Yet the company last month said the merger agreement remained in effect. JetBlue's stock has gained 36% since the merger ruling.

What's happening with Spirit Airlines? ›

JetBlue to buy Spirit Airlines for $3.8 billion

JetBlue will purchase Spirit Airlines for $3.8 billion, one day after shareholders rejected a potential merger between Spirit and Frontier Airlines. If approved, the airline would become the nation's fifth-largest.

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