A merger agreement between JetBlue and Spirit has been called off mostly due to regulatory roadblocks.
JetBlue Airways and Spirit Airlines announced Monday that theyâre terminating their merger agreement, citing an inability to finalize closing conditions by deadline and regulatory obstacles.
It a statement, JetBlue said the two companies âcontinue to believe in the procompetitive benefits of the combination,â but they had mutually agreed to cancel the planned deal.
âTerminating is the best path forward for both companies as required closing conditions, including receiving necessary legal and regulatory approvals, were unlikely to be met by the merger agreementâs outside date of July 24, 2024,â JetBlue said in its statement.
Spirit said in a statement had discussed options with JetBlue, but ultimately concluded that regulatory roadblocks make the merger unfeasible.
âDisappointedâ
In July 2022, JetBlue struck a deal to buy Spirit in a transaction valued at $3.8 billion, hoping to lay the foundation of a low-fare challenger to the dominant Big Four U.S. airlines (American, Delta, United, and Southwest). Announcement of the merger agreement came a mere hours after Spirit scuttled plans for a combination with fellow discount carrier Frontier Airlines.
Under the deal, JetBlue was to buy Spirit for $33.50 per share in cash, including a prepayment of $2.50 per share that would have been payable once Spirit stockholders approve the transaction.
At the time, the two carriers said they expected the regulatory process to conclude and the transaction to close in the first half of 2024 at the latest, with the March 4 announcement putting an end to those plans.
âWe believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,â JetBlue CEO Joanna Geraghty said in a statement.
âWe 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 airlinesâ interests are better served by moving forward independently. We wish the very best going forward to the entire Spirit team,â she added.
JetBlue will pay Spirit $69 million to dissolve the merger agreement, with Mondayâs termination releasing any claims between the two carriers and resolving all outstanding matters between the two carriers.
Spirit CEO Ted Christie said in a statement that itâs unfortunate the deal fell through.
âWe 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 âBig 4â U.S. airlines,â he said. âHowever, we remain confident in our future as a successful independent airline. We wish the JetBlue team well.â
The merger would have established the fifth-biggest airline in the United States.
For JetBlue, merging with Spirit was widely seen as a path of least resistance to acquiring Spiritâs existing planesâa fleet that would have let JetBlue compete with the Big Four airlines.
The combined airline would have had a fleet of 458 aircraft and an order book of more than 300 Airbus planes. It would have had a roughly 9 percent market share, compared to about 13 percent for United Airlines (the fourth-largest) and around 23 percent for Southwest, which is the largest carrier.
JetBlue Alliance With American Airlines Ends
In May 2023, a federal judge in Boston ruled that American Airlines and JetBlue Airways must abandon their partnership in the northeastern United States on grounds that the partnership was anti-competitive and harms customers.
The partnership between the two air carriers was a joint venture called the Northeast Alliance. It had been approved by the Transportation Department under former President Donald Trump and took effect in early 2021.
But the Justice Department (DOJ) under President Joe Biden sued to block the joint venture, arguing it would eliminate important competition and harm air travelers across the country.
The court ultimately sided with the DOJ, arguing that by consolidating their operations in Boston and New York City, the two airlines violated Section 1 of the Sherman Act because their joint venture increased fares and reduced customer choice.
Following the decision, JetBlue announced that the Northeast Alliance had ended and instead focused its efforts on pursing the merger with Spirit, which is now defunct.
In December 2023, American Airlines asked an appeals court to reverse the ruling that dissolved its partnership with JetBlue.
Attorneys for American Airlines said that even though the Northeast Alliance had dissolved, the case was not moot as American remains subject to a permanent injunction that limits its ability to enter into other commercial arrangements.
The injunction prohibits American and JetBlue from entering into any similar arrangements for 10 years.
Original News Source Link – Epoch Times
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