US low-cost air carriers JetBlue Airways and Spirit Airlines canceled their $3.8-billion merger agreement today, seeing no path forward after a judge blocked the deal in January on anti-competition concerns.
A successful deal would have created the fifth-largest carrier in the US and helped Spirit ensure its survival, but the deal had been on the ropes ever since a Boston judge said it would harm consumers by reducing competition.
"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," JetBlue CEO Joanna Geraghty told employees in an internal note seen by Reuters.
"Even if the ruling was overturned on appeal, we simply don’t see a path to regulatory approval by the required July 24 deadline," the CEO added.
Spirit CEO Ted Christie said in a statement, "we concluded that current regulatory obstacles will not permit us to close this transaction in a timely fashion under the merger agreement."
Under the agreement, JetBlue will pay Spirit $69m. While the merger agreement was in effect, Spirit stockholders received approximately $425mn in total pre-payments.
Without the JetBlue deal, Spirit, the seventh-largest US carrier, faces a rough road ahead.
The ultra-low-cost carrier has grappled with weak demand in its key markets as it seeks to return to sustainable profitability. Some analysts have even suggested the company could face bankruptcy if it cannot shore up finances.
The decision is a victory for the Biden administration, which has taken a hard line against tie-ups in the aviation sector and argued the deal would increase ticket prices for consumers.
The administration has used antitrust action and other enforcement efforts to try to bring down prices for US residents across several industries.
The ruling by US District Judge William Young found the proposed deal was likely to hurt competition in the US aviation market and could hike ticket prices.
That prompted JetBlue to raise doubts over the future of its deal, saying it might be unable to meet certain conditions required as part of the agreement.
JetBlue opted not to appeal a separate ruling that had declared its Northeast partnership with American Airlines anticompetitive.
JetBlue, which last month hiked baggage fees, said is working on numerous near-term efforts to boost revenue by more than $300m and said it is on track to deliver $175-200m in cost savings from its structural cost programme and $75m in maintenance savings from its fleet modernisation.
A judge in May sided with the Justice Department and six states in a lawsuit challenging the joint venture that American and JetBlue entered into in 2020, called the "Northeast Alliance," joining forces for flights in and out of New York City and Boston, coordinating schedules and pooling revenue.
Spirit said it was taking steps to ensure the strength of its balance sheet and ongoing operations
