On Friday, JetBlue Airways Corporation JBLU and Spirit Airlines Inc. SAVE confirmed they’re challenging a federal judge’s decision that prevents their proposed merger on grounds of antitrust.
What Happened: JetBlue’s initial plan was to buy Spirit for $3.8 billion, as agreed in 2022. However, this plan was halted by a federal judge on Tuesday, arguing that the merger would lead to the elimination of the budget airline and result in higher prices for cost-conscious customers.
Following the announcement of the appeal, Spirit’s shares soared over 10% in after-hours trading on Friday, while JetBlue’s shares saw a minor drop. JetBlue has now confirmed the appeal in line with the prerequisites of the merger agreement, reported CNBC.
Judge William Young noted in his ruling that JetBlue aimed to reduce the number of seats on Spirit’s densely populated aircraft. He added that the removal of Spirit from the market would deprive cost-sensitive travelers of a choice.
Before the court ruling, Spirit, headquartered in Miramar, Florida, faced challenges such as declining travel demand, increased costs, and grounded planes due to a Pratt & Whitney engine problem.
The judge’s decision raised concerns among Wall Street analysts regarding Spirit’s ability to endure, causing a significant drop in the company’s stock shares.
Why It Matters: Spirit’s stock had plummeted over 60% after the initial ruling. It was previously reported that the budget airline was encouraging JetBlue to appeal the decision, which stated that the merger could lead to higher ticket prices.
JetBlue had argued that its acquisition of Spirit was necessary to compete with larger airlines. Access to Spirit’s similar fleet of Airbus aircraft would have allowed it to grow quickly despite industry challenges, including a shortage of planes and pilots.
Earlier, President Joe Biden had praised the judge’s decision to block the merger, stating that it was a win for consumers seeking lower prices and more options.
Despite the hurdles, Spirit plans to refinance its debt of over $1 billion, due in September 2025 and has a positive financial forecast. Meanwhile, the U.S. Department of Justice is set to examine another merger proposal between Alaska and Hawaiian Airlines, the report noted.
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
Photos: Courtesy JeftBlue, Spirit Airlines