< Reveal sidebar

JetBlue, Spirit Call Off $3.8 Billion Merger

Both airlines say they cannot meet regulatory requirements by July 24 deadline.

JetBlue and Spirit aircraft (Photo: AirlineGeeks | William Derrickson)

JetBlue and Spirit have announced they will officially terminate their $3.8 billion merger agreement. JetBlue had planned to purchase Spirit until the U.S. Department of Justice (DOJ) sued to block the merger; a federal judge agreed with the DOJ in January and blocked the deal on antitrust grounds.

After the judge’s ruling, JetBlue and Spirit announced they would continue to fight the ruling and pursue a merger. In a joint statement at the time, the two carriers said they believed that cooperation would lower fares for customers by allowing a larger JetBlue to compete more evenly with the big four U.S. carriers.

Now, the two airlines have announced a joint statement saying dropping the merger deal is “the best path forward,” citing the challenging legal hurdles ahead. The airlines say that, while they still believe in the competitive benefits of merging, it is unlikely they will be able to reach the necessary legal and regulatory approvals by July 24, which the agreement requires.

“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,” said JetBlue CEO Joanna Geraghty in a press release.

“With the ruling from the federal court and the Department of Justice’s continued opposition, the probability of getting the green light to move forward with the merger anytime soon is extremely low,” Geraghty wrote in an internal memo.

“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,” said Spirit CEO Ted Christie. “However, we remain confident in our future as a successful independent airline.”

JetBlue hinted after the initial ruling that they may not appeal the ruling. However, there was strong pushback from Spirit shareholders, so the appeal was filed. Now, JetBlue will pay Spirit $69 million, which their agreement required if the deal could not meet regulatory requirements. Spirit shareholders have also received $425 million in prepayments from JetBlue during merger proceedings.

Concerns for Spirit’s Future

Since the deal was originally rejected earlier this year, there have even been concerns about Spirit’s future as an airline due to financial struggles. The airline has significant debt that it must refinance. Helane Becker, an analyst with Cowen, said in January that a potential Spirit bankruptcy would likely result in the airline’s assets being liquidated instead of being restructured.

​​“We recognize this sounds alarmist and harsh, but the reality is we believe there are limited scenarios that enable Spirit to restructure,” Becker wrote. “We believe Spirit will first look for an alternative buyer, but another airline may get the same pushback [from antitrust regulators.]”

There is a likelihood, however slim, that Spirit will return to Frontier Airlines for a potential partnership. Frontier originally planned to buy Spirit until JetBlue launched a hostile takeover and outbid Frontier. Given the January JetBlue ruling, this may be unlikely. Alaska Airlines’ purchase of Hawaiian, which will keep the two brands separate, may open up a potential new route for Spirit to be bought by another parent company while keeping the brand alive.

Still, Spirit says it is on a path back to profitability on its own thanks to better-than-expected demand. First quarter revenue is expected to outpace expectations.

​​“Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the Guest experience,” Christie said after the Monday announcement.

John McDermott

Author

  • John McDermott

    John McDermott is a student at Northwestern University. He is also a student pilot with hopes of flying for the airlines. A self-proclaimed "avgeek," John will rave about aviation at length to whoever will listen, and he is keen to call out any airplane he sees, whether or not anyone around him cares about flying at all. John previously worked as a Journalist and Editor-In-Chief at Aeronautics Online Aviation News and Media. In his spare time, John enjoys running, photography, and watching planes approach Chicago O'Hare from over Lake Michigan.

    View all posts

Subscribe to AirlineGeeks' Daily Check-In

Receive a daily dose of the airline industry's top stories along with market insights right in your inbox.

Related Stories

Kalitta Air Faces $400,000 Penalty for FAA Violation

The Federal Aviation Administration has proposed a civil penalty of $400,000 against cargo airline Kalitta Air for allegedly operating flights…

Southwest Strikes Deal With Archer for Electric Air Taxi Service

Southwest Airlines is set to become the third major U.S. commercial airline to offer air taxi services using an unusual…

Boeing Pleads Guilty in Criminal Case

Boeing has agreed to plead guilty to a criminal fraud conspiracy charge related to two fatal 737 MAX accidents that…