JetBlue Airways and Spirit Airlines, two of the United States' leading low-cost carriers, have called off their proposed $3.8 billion merger agreement. The decision came after a U.S. judge blocked the deal in January on anti-competition concerns. The Justice Department had sued to bar the deal last year, alleging that the acquisition would stifle competition in the airline industry and eliminate Spirit as a discount alternative for price-conscious travelers. A successful deal would have created the fifth-largest carrier in the United States and helped Spirit ensure its survival.
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However, the deal had been on the ropes ever since a Boston judge said it would harm consumers by reducing competition. JetBlue CEO Joanna Geraghty told employees in an internal note, "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."
Without the JetBlue deal, Spirit, the seventh-largest U.S. carrier, faces a rough road ahead. The ultra-low-cost carrier has grappled with weak demand in its key markets as it seeks to return to sustainable profitability. Some analysts have even suggested the company could face bankruptcy if it cannot shore up finances. The decision is a victory for the Biden Administration, which has taken a hard line against tie-ups in the aviation sector and argued the deal would boost ticket prices for consumers. The administration has used antitrust action and other enforcement efforts to try to bring down prices for U.S. residents across several industries.
Under the agreement, JetBlue will pay Spirit $69 million. While the merger agreement was in effect, Spirit stockholders received approximately $425 million in total pre-payments⁴⁵. The termination of the merger agreement marks a significant moment in the aviation industry, underscoring the challenges of consolidation in a highly competitive market.