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Updated March 4th, 2024 at 19:36 IST

JetBlue Airways terminates merger agreement with Spirit Airlines

Had the merger proceeded, it would have given rise to the fifth-largest carrier in the United States.

Reported by: Business Desk
JetBlue narrows loss forecast
JetBlue | Image:JetBlue
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Low-cost carriers JetBlue Airways and Spirit Airlines have officially called off their $3.8 billion merger agreement on Monday, acknowledging the absence of a viable path forward following a federal judge's intervention in January over anti-competitive concerns.

The proposed merger, which aimed to forge the fifth-largest carrier in the United States and bolster Spirit's financial stability, faced mounting challenges since a Boston judge cast doubt on its benefits to consumers due to potential competition reduction.

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JetBlue CEO Joanna Geraghty conveyed the sobering reality to employees via an internal memo obtained by Reuters, stating, "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 stressed on the slim prospects of regulatory approval, especially given the looming July 24 deadline, even in the event of a successful appeal to overturn the initial ruling.

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For Spirit Airlines, the termination of the deal casts a shadow over its future trajectory. The ultra-low-cost carrier has been grappling with subdued demand in its core markets as it endeavours to regain sustainable profitability. Concerns over its financial resilience have even led some analysts to speculate about potential bankruptcy if the company fails to fortify its financial position.

In premarket trading, Spirit's shares experienced a notable 14 per cent decline, while JetBlue's shares surged by as much as 7 per cent, reflecting investor sentiment in response to the news.

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The decision marks a significant victory for the Biden Administration's endeavours to alleviate costs for consumers. Through its vigorous antitrust measures and other enforcement initiatives, the administration has actively pursued strategies aimed at curbing prices for US residents across various industries.

US District Judge William Young's ruling underscored the potential detrimental impact of the proposed merger on competition within the US aviation market and its potential adverse implications for ticket prices, prompting JetBlue to express uncertainty regarding the future viability of the deal due to potential challenges in meeting requisite conditions.

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(With Reuters inputs)

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Published March 4th, 2024 at 19:20 IST

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