New York, USA – Low-cost air carriers JetBlue Airways and Spirit Airlines have terminated their $3.8 billion merger agreement, following a previous ruling by a US judge in January that blocked the deal due to anti-competition concerns. The merger, if successful, would have created the United States’ fifth-largest carrier and would have helped Spirit Airlines secure its survival. However, the deal faced obstacles ever since a Boston judge warned that it would harm consumers by reducing competition.
JetBlue CEO Joanna Geraghty informed employees through an internal note seen by Reuters that the likelihood of obtaining regulatory approval for the merger is now extremely low. Even if the initial ruling was overturned on appeal, Geraghty stated that the required regulatory approval would not be obtained by the July 24 deadline.
This cancellation leaves Spirit Airlines facing a challenging future. The ultra-low-cost carrier has been struggling with weak demand in its key markets as it seeks to achieve sustainable profitability. Some analysts have even suggested that the company might face bankruptcy if it fails to strengthen its finances. As a result, Spirit Airlines’ shares fell by 14% in premarket trading, while JetBlue’s shares rose by up to 7%.
The termination of the merger is considered a victory for the Biden administration’s efforts to lower costs for consumers. In an attempt to reduce prices across various industries, the administration has been utilizing antitrust action and other enforcement efforts.
The ruling by US District Judge William Young highlighted concerns that the proposed merger would harm competition in the US aviation market and potentially impact ticket prices.
The cancellation of the JetBlue-Spirit merger indicates the challenges faced by airlines as they navigate through the ongoing COVID-19 pandemic. With the airline industry still recovering from the significant impact of travel restrictions and reduced demand, mergers and partnerships were seen as potential strategies to consolidate resources and strengthen operations.
However, the termination of this merger raises questions about the future of similar deals within the industry. It also emphasizes the importance of regulatory approvals in ensuring fair competition and protecting consumers’ interests.
As both JetBlue and Spirit Airlines face the consequences of the failed merger, industry experts will be closely monitoring their strategies and financial outlook. The outcome of their individual efforts to recover and adapt to the post-pandemic travel landscape will undoubtedly shape the future of the airline industry.