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JetBlue announced today that it has officially terminated its deal to acquire Spirit Airlines. This was expected to happen after the Department of Justice (DOJ) won its case to block the merger in January. JetBlue is on the hook to pay Spirit $69 million, which is the last thing the low-cost carrier needs given its recent financial and operational performance (neither has been good).
JetBlue Airways announced in July 2022 that it wanted to acquire Spirit Airlines for $3.8 billion. Frontier Airlines was planning to merge with Spirit, but JetBlue outbid them and started on its path to combining the two low-cost carriers. JetBlue began divesting gates and ended its Northeast Alliance with American Airlines. The acquisition looked to be on track until the DOJ sued to shut it down and won.
Both airlines believe in the benefits of combining the airlines, but they have mutually agreed that terminating the agreement is now the best path forward given the closing conditions (including legal and regulatory approvals) would likely not be met by the merger agreement’s outside date of July 24th.
Joanna Geraghty, Chief Executive Officer at JetBlue commented:
We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines. We are proud of the work we did with Spirit to lay out a vision to challenge the status quo, but given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently. We wish the very best going forward to the entire Spirit team.”
Spirit’s President and Chief Executive Officer, Ted Christie, added:
After discussing our options with our advisors and JetBlue, we concluded that current regulatory obstacles will not permit us to close this transaction in a timely fashion under the merger agreement. 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’ US airlines. However, we remain confident in our future as a successful independent airline. We wish the JetBlue team well.”
What’s Next for JetBlue?
JetBlue’s stock price is down around 60% in three years and its on-time performance is among the worst in the United States. A lot of what made JetBlue different and special has been stripped away or become common on other airlines (seatback monitors and free Wi-Fi). The new CEO is in place and other new management is being brought in. Hopefully, they’ll be able to pivot and go back to what made the carrier successful in the past. It has gotten distracted over the past few years with international expansion (which has not proven to be profitable) and not focusing on its core business.
Anthony’s Take: This merger looked doomed after the judge’s ruling. It will be interesting to see how both carriers fare and if JetBlue can regain its footing.
(Image Credits: JetBlue and Spirit Airlines.)
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