By JetBlue Airways and Spirit Airlines on Monday said they were terminating their merger agreement weeks after losing a federal antitrust lawsuit that challenged the deal.
A federal judge blocked the attempted merger in January after the Justice Department sued to bar the deal last year alleging the acquisition would stifle competition in the airline industry and eliminate Spirit as a discount alternative for price-conscious travelers.
JetBlue and Spirit appealed the judge’s decision a couple of days later, but JetBlue noted the appeal was required under the terms of the merger agreement.
Spirit shares tumbled 17% in premarket trading, while shares of JetBlue were up roughly 4%.
“It was a bold and courageous plan intended to shake up the industry status quo, and we were right to compete with Frontier and go for an opportunity that would have supercharged our growth and provided more opportunities for crewmembers,” JetBlue CEO Joanna Geraghty said in a note to staff Monday.
“However, 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’s prospective purchase of Spirit would have been a buoy for the struggling discounter airline, which is facing the grounding of dozens of its Airbus planes for inspections stemming from a Pratt & Whitney engine defect. Spirit expects compensation from the engine maker as a result of the flaw.
With the deal off the table, Spirit must confront its financial problems alone, something its leaders say it is equipped to do.
The company said it was working to refinance its debt, and last month said it was on a path back to profitability thanks to better-than-expected demand. It projected revenue for the first quarter above analysts’ expectations.
“Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the Guest experience,” Spirit CEO Ted Christie said in a release.
He said Spirit shareholders received $425 million in prepayments from JetBlue during the agreement, and that JetBlue will pay Spirit $69 million related to the agreement’s termination.
