Judge Blocks JetBlue/Spirit Merger Completely

by Anthony Losanno
JetBlue Spirit

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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. The Department of Justice (DOJ) challenged the merger in court. The trial ended last month (more here) and today the judge issued his ruling. It blocks the merger completely.

Spirit Airlines Plane

JetBlue’s acquisition of Spirit has been blocked completely. There will be no additional concessions accepted and the deal is off on the basis that it is in violation of the Clayton Act. The court’s decision reads:

In sum, the Court has made its best attempt, applying the law to the evidence in this case, to predict the future of a dynamic market recovering from the COVID-19 pandemic, in markedly uncertain times. For the reasons set forth above, therefore, the Court rules that the proposed acquisition violates Section 7 of the Clayton Act. Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you. Why? Because the Clayton Act, a 109-year-old statute requires this result –- a statute that continues to deliver for the American people.”

This is horrible news for JetBlue as it will now need to pay Spirit the $400 million promised in the event the deal fell through (if it does not appeal, which it likely will). The DOJ argued from the beginning that a merger between JetBlue and Spirit would decrease competition and increase fares. JetBlue’s attorneys made a mistake at one point and released documents that were not properly redacted. They showed that the carrier would indeed raise fares by as much as 40% (more here). This likely wasn’t what caused the verdict of the case, but was a careless mistake. There are 51 markets served by both JetBlue and Spirit and the DOJ argues that fares will especially increase here.

JetBlue A321

JetBlue has countered from the beginning that the merger would create a fifth airline that could better compete with American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. To proactively try to appease the DOJ, JetBlue has given up slots to Frontier (more here) and Allegiant (more here). This had not been enough to appease the DOJ and the lawsuit to block the merger moved forward.

Judge Young, an appointee of Ronald Reagan, oversaw the case. He made a few statements last month that could be read into, but was not definitive one way or the other until today. He asked the DOJ if it would be satisfied if JetBlue agreed to more divestitures. The DOJ did not seem happy with that solution and still feels that “there does not seem to be a remedy other than a full-stop injunction that would restore competition.” In the end, it looks like Judge Young agreed.

Anthony’s Take: This is actually a bit surprising as I had thought JetBlue would be asked to make additional divestitures and then move on with the deal. Spirit’s stock has dramatically fallen in light of this news and JetBlue’s has seen its shares increase today. We’ll now need to see if JetBlue appeals and if a Frontier/Spirit merger once again becomes a possibility.

(Image Credits: JetBlue and Spirit Airlines.)

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