JetBlue Airways Corp.’s proposed $3.8 billion acquisition of Spirit Airlines Inc. has been blocked by a federal judge, who voiced concerns that the combination of these airlines would result in less competition and increased fares for consumers.
The decision was handed down by US District Judge William G. Young, who stood with the federal government’s assertion that the merger would detrimentally impact cost-conscious travelers by removing the nation’s primary provider of deep-fare discounts and consequently driving up prices across the airline industry.
“If JetBlue were permitted to gobble up Spirit — at least as proposed — it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline,” Young wrote on Tuesday.
JetBlue and Spirit defended the merging as the only way smaller airlines can authentically compete with the larger-carriers. However, they now have the challenging decision to either challenge the ruling — which is expected to be a longshot given the merger agreement is set to expire in six months — or abandon the deal entirely.
The effect of the ruling has already been felt by both companies. Spirit’s shares dropped by 47% in New York on Tuesday, marking the largest decline since the stock started trading over a decade ago, while JetBlue’s shares climbed by 4.9%.
JetBlue’s previous attempt to form a Northeast Alliance with American Airlines Group Inc. also faced legal opposition, being dubbed illegal by a federal judge in May. The judge ordered the partnership dismantled, however, American is currently appealing this ruling.
Of interest to JetBlue and Spirit, Young made it clear that they could apply for a merger at a later stage. “The courthouse doors remain open should the Defendant Airlines decide to try again, and the Government then wishes to prevent such an attempt”
Other potentially affected parties include Alaska Air Group Inc., whose proposed $1.9 billion acquisition of Hawaiian Holdings Inc. is currently under review. The shares of Hawaiian have already dropped nearly 2% due to increasing concerns over antitrust challenges.
Judge Young’s verdict is a notable win for the Biden administration’s antitrust enforcers, who have recently taken a more aggressive stance on mergers in a bid to reduce market concentration and foster competition.
For further information please refer to the initial reporting by Bloomberg, found here.