Benzinga - by Piero Cingari, Benzinga Staff Writer.
JetBlue Airways Corporation (NASDAQ:JBLU) announced the termination of a deal Monday to acquire Spirit Airlines Inc. (NASDAQ:SAVE) for $3.8 billion, following a decisive legal blockade by the Department of Justice.
This decision follows the blockage of the transaction by the U.S. District Court for the District of Massachusetts, citing a breach of antitrust laws aimed at safeguarding the market and its participants from anti-competitive harm.
As a consequence of this termination, JetBlue is set to pay Spirit a $69-million termination fee, effectively settling all disputes related to the failed merger.
The Justice Department said its decision was rooted in antitrust violations, highlighting need to preserve competitive fares and choices for American travelers.
Justice Department Hails Decision As Consumer Victory
The blockage of the merger was celebrated by the Justice Department as a significant victory for consumer protection.
Attorney General Merrick Garland remarked: “Today's decision by JetBlue is yet another victory for the Justice Department's work on behalf of American consumers.”
This sentiment was echoed by Assistant Attorney General Jonathan Kanter, who emphasized the win as a “victory for U.S. travelers who deserve lower prices and better choices."
Kanter highlighted the court’s recognition of consumers “who otherwise would have no voice,” underscoring the merger’s potential harm had it proceeded.
The trial, which lasted 17 days, began in October 2023 and involved a coalition of states alongside the Justice Department. They argued the merger would lead to increased prices and decreased choices on routes where JetBlue and Spirit compete, violating Section 7 of the Clayton Act.
JetBlue, Spirit Reactions CEOs On Failed Acquisition
Despite the merger’s initial promise to create a formidable competitor to the “Big Four” airlines, both JetBlue and Spirit have resolved to move forward independently.
“We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” said Joanna Geraghty, CEO of JetBlue.
Regulatory hurdles have made it clear that proceeding under the current terms was not feasible, she said.
Spirit’s president and CEO Ted Christie expressed a similar sentiment, stating, “We are disappointed we cannot move forward with a deal that would save hundreds of millions for consumers and create a real challenger to the dominant ‘Big 4’ U.S. airlines.” Nonetheless, Spirit remains optimistic about its future as an independent entity.”
Market Reactions Following the announcement, JetBlue’s shares saw a surge of 4.3% on Monday, while Spirit’s shares experienced a nearly 11% drop.
Overall, the airline sector, as tracked by the U.S. Global Jets ETF (NYSE:JETS), held broadly unchanged for the day.
Monday’s top performer among airline stocks was Frontier Group Holdings Inc. (NASDAQ:ULCC), up 11%, while American Airlines Group Inc. (NASDAQ:AAL), was the major laggard, down over 4%.
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Photos courtesy of Spirit, JetBlue.
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