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JetBlue, Spirit Comment on Merger Blockage
The two companies say they are evaluating their next steps.
JetBlue Airways has responded to a federal judge’s Tuesday decision to block its merger with Spirit Airlines. Judge William Young agreed with the Justice Department’s argument that removing Spirit Airlines would reduce customer choice and competition, thus limiting competition and raising prices.
“We disagree with the U.S. District Court’s ruling. We continue to believe that our combination is the best opportunity to increase much needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant U.S. carriers,” JetBlue and Spirit said in a joint statement.
“JetBlue’s termination of the Northeast alliance and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised,” the airlines continued, adding they are “reviewing the court’s decision and…evaluating our next steps as part of the legal process.”
JetBlue will owe Spirit $400 million if the deal is blocked by regulatory bodies, adding to the carrier’s incentive to succeed with this merger. The carrier believes that the merger will allow it to compete more directly with the big four U.S. carriers by expanding its fleet and earning it slots in various lucrative airports virtually overnight.
JetBlue has gone from a true low-cost carrier to an airline loved by passengers for its comfortable aircraft and relatively generous amenities. When the carrier adds a new destination, prices in that market tend to drop naturally because of JetBlue’s presence, a phenomenon known as the “JetBlue effect.”
Spirit’s stock prices have dropped 60% since the merger was blocked this morning. The carrier has been struggling in recent months and completely paused new hire training for flight crews last fall. The failure of this merger could signal future trouble for company stakeholders, who may be concerned about the short-term future of the company considering the headwinds it and other ultra-low-cost airlines have lately faced.
“Spirit is a small airline. But there are those who love it,” Judge Young wrote in his ruling. “To those dedicated customers of Spirit, this one’s for you.”
JetBlue and Spirit have yet to announce what their next step will be. A legal appeal may be likely, but the two carriers could also pursue a codeshare or interline agreement that sends passengers from one carrier to the other. This might give JetBlue the ability to increase its marketing and publicity in select new markets without needing to spend money on buying or refurbishing planes or securing slots. It could also allow JetBlue to attract more passengers to its transatlantic flights by giving passengers a direct line to cheaper alternatives to mainline carriers.
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