JetBlue prevented from buying Spirit Airlines

A federal judge has halted JetBlue Airways Corp.'s $3.8 billion acquisition of Spirit Airlines Inc., stating that the merger would impede competition and lead to increased fares for consumers. US District Judge William G. Young agreed with the federal government, expressing concerns that the combination would negatively impact cost-conscious travelers by eliminating the nation's leading deep-fare discount airline, potentially raising prices across the industry.

Judge Young's decision, following a closely monitored trial in November, aligns with the government's argument that the merger could eliminate a vital incentive for larger airlines to provide budget-friendly fares. The ruling is seen as a significant victory for the Biden administration's antitrust enforcement, which has taken a more assertive stance on mergers.

Spirit Airlines' shares experienced a 47% plunge in New York, following a 61% drop, marking the largest intraday decline since the stock's trading debut over a decade ago. In contrast, JetBlue's shares initially spiked 11% on the news before settling with a 5.9% gain.

JetBlue and Spirit, who contended that consolidation was necessary for smaller airlines to effectively compete, are now evaluating their next steps. The ruling is a setback to JetBlue's growth strategy, and this marks the second time in less than a year that the airline has faced a federal antitrust challenge.

Under the terms of the deal, if the merger fails due to antitrust reasons, JetBlue will need to pay $470 million to Spirit and its shareholders. The agreement is set to expire in July 2024. JetBlue and Spirit may appeal the decision to the First US Circuit Court of Appeals, and the final outcome could reshape the competitive landscape for low-cost carriers in the US.

In an effort to address antitrust concerns, JetBlue had committed to selling several airport gates and flying slots owned by Spirit to low-cost carriers Frontier Group Holdings Inc. and Allegiant Airlines.