LaGuardia International Airport Terminal A for JetBlue and Spirit Airlines in New York.
Leslie Josephs | CNBC
A federal judge issued the injunction Tuesday. jet blue airlines‘Purchase of spirit airlines The Justice Department filed a lawsuit seeking to block the merger, arguing that it would eliminate discount airlines from the market and raise fares for price-sensitive consumers.
JetBlue’s proposed $3.8 billion takeover of discount company Spirit would have created the country’s fifth-largest airline, but the airline said the deal would accelerate its growth and It claimed that it would help it compete with major rivals such as . delta and united.
“JetBlue plans to convert Spirit aircraft to JetBlue layouts and charge customers JetBlue’s higher average fares,” U.S. District Judge William Young wrote in his ruling. said. “Spirit’s discontinuation will hurt cost-conscious travelers who rely on Spirit’s low fares.”
The decision, handed down Tuesday, marks a victory for the Justice Department, which has aggressively sought to block deals it deems anticompetitive.
The Justice Department said in a lawsuit filed in March that JetBlue’s acquisition of the low-cost airline would eliminate Spirit and “approximately half of the seats on all ultra-low-cost carriers in the industry, leaving tens of millions of passengers exposed to higher fares.” “They will be forced to pay for it.” . ”
Spirit has grown rapidly in recent years by offering low fares and rates on everything from seat assignments to carry-on bags, a no-frills model that has become a favorite punchline for late-night comedians.
“Spirit is a small airline, but there are people who love it,” Young wrote in his ruling. “Dear Spirit customers, this is for you.”
After the ruling, Spirit stock plummeted, dropping more than 50%, while JetBlue’s stock rose about 5%.
As of Friday’s close, Spirit’s market capitalization was $1.66 billion, less than half of JetBlue’s offer. The Miramar, Florida-based airline has struggled to ground planes due to engine manufacturing issues and weaker-than-expected travel demand.
Stock prices after a federal judge blocks Spirit Airlines and JetBlue Airways’ proposed merger.
JetBlue and Spirit said in a joint statement that they disagree with the ruling and are considering next steps.
“Our partnership brings much-needed competition and choice by offering lower fares and superior service to more customers in more markets, while strengthening our competitiveness with leading U.S. carriers. We continue to believe that this is the best opportunity to increase this,” the airline said.
Another federal district judge in Massachusetts sided with the Justice Department last year in blocking a regional partnership with JetBlue. american airlines In the Northeast, partnerships have allowed airlines to adjust routes and schedules.
JetBlue and Spirit said Tuesday that “JetBlue’s termination of Northeast Alliance and its commitment to a significant divestment eliminates the reasonable anticompetitive concerns raised by the Department of Justice.”
A hard-won deal
JetBlue fought hard for Spirit.A few weeks later he launched a hostile takeover. frontier airlines and Spirit have agreed to merge in a cash and stock transaction. Frontier’s business model is more similar to Spirit’s, and both airlines have similar fleet mixes, unlike JetBlue’s more full-service model, which contrasts with Spirit’s discount strategy.
After Spirit’s board of directors rejected JetBlue’s initial takeover offer, Spirit CEO Ted Christie announced plans in May 2022 to partner with American Airlines and take back seats from JetBlue’s market. He said he did not believe the deal with JetBlue would be approved by regulators, citing
“In our opinion, that’s not going to happen, and that’s why the board rejected it. And I think it’s insulting to suggest otherwise,” he said at the time on CNBC’s “Squawk Box.” Ta.
Spirit shareholders ultimately rejected the Frontier deal and approved JetBlue’s sweeter offer months later in October 2022.
New CEO
Judge Young’s decision leaves New York-based JetBlue taking the next step, tasking incoming CEO Joanna Geraghty with leading the airline on a new path. Mr Geraghty was announced as CEO Robin Hayes’ successor after the latter announced earlier this month that she would be stepping down.
JetBlue has argued that access to Airbus planes similar to Spirit will allow it to grow quickly at a time when there is a shortage of planes and pilots, and that it needs growth to compete with larger airlines. The airline operates in the highly congested airspace of New York and other cities and planned to use Spirit as a way to gain access to more routes and travelers.
Consolidation over the past few years has resulted in United Airlines, Delta Air Lines, American Airlines, and southwest It controls about three-quarters of the domestic market.
JetBlue planned to modify its yellow Spirit planes, removing branding and seats from the tightly packed jets and offering a more full-service model.
“Although Spirit’s yellow livery will not immediately be repainted to match JetBlue’s aircraft, once the merger is completed, Spirit and JetBlue will no longer be competitors,” Young said in the decision. It was written in
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