The $3.8 billion JetBlue acquisition of Spirit Airlines has been grounded—at least for now.
The judge presiding over the civil lawsuit brought by the U.S. Department of Justice along with the District of Columbia and six states against the proposed acquisition, announced in July 2022, ruled that combining the airlines would violate the Clayton Antitrust Act.
The non-jury trial took place late last year in a U.S. district court in Massachusetts. Judge William Young in his ruling noted that “there are no ‘bad guys’ in this case,” as the carriers simply were trying to maximize shareholder value, but if JetBlue were allowed to “gobble up Spirit,” it would eliminate one of the airline industry’s “few primary competitors that provides unique innovation and price discipline.”
Though a combination of the carriers would “likely place stronger competitive pressure” on the larger U.S. airlines, “at the same time, however, the consumers that rely on Spirit’s unique, low-cot model would likely be harmed,” according to Young’s ruling.
The judge added that the merger would “further consolidate an oligopoly,” and “worse yet, the merger would likely incentivize JetBlue further to abandon its roots as a maverick, low-cost carrier.”
JetBlue and Spirit in a joint statement disagreed with the ruling, noting that JetBlue already had terminated its so-called Northeast Alliance with American Airlines under court order, assuaging anticompetitive concerns.
“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,” according to the airlines. “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.”
As for whether the carriers will appeal the ruling: “We are reviewing the court’s decision and are evaluating our next steps as part of the legal process.”
Merger History
The ruling came about seven months after JetBlue and American lost a lawsuit against the DOJ and were ordered to dismantle the Northeast Alliance partnership. The NEA played a key role in Spirit’s decision to merge with JetBlue.
Spirit in February 2022 initially agreed to merge with Frontier Airlines, but JetBlue made a competing proposal that April. The Spirit board of directors rejected the first offer, citing the NEA and its lawsuit as a key reason why it expected a would-be acquisition of Spirit by JetBlue would fail. JetBlue even had offered a $200 million reverse break-up free should the transaction not close due to antitrust reasons.
JetBlue’s bid became hostile over the ensuing months, with JetBlue upping its offer to include a $400 million break-up fee and Spirit postponing the Frontier shareholder vote four times. In each rejection of JetBlue’s offers, Spirit noted the NEA and its belief that the combination would not receive regulatory approval.
Frontier, however, eventually called off its merger deal, and Spirit accepted the JetBlue deal the next day.
JetBlue stock as of 3:30 p.m. had increased about 6.7 percent since Tuesday’s ruling was announced, however Spirit’s had declined nearly 47 percent.
