NEW YORK (AP) – Prospects for a merger between JetBlue and Spirit Airlines took a major blow in court Tuesday when a federal judge sided with the Biden administration and blocked the $3.8 billion merger.
A judge ruled that JetBlue's acquisition of Spirit, the nation's largest low-cost airline, would stifle competition and result in higher prices for air travelers. JetBlue, on the other hand, argues that such contracts are necessary to compete with industry rivals.
Here's an overview of what you need to know.
Why was the JetBlue-Spirit merger blocked?
It all boils down to competition concerns. The Justice Department and several state attorneys general filed a lawsuit last year seeking to block the merger, arguing that eliminating lower-priced spirits would raise fares. U.S. District Judge William Young agreed.
Mr. Young, who was appointed to Congress by President Ronald Reagan, ruled that the merger would stifle competition and violate antitrust laws.
“There is no 'bad guy' in this case,” the Boston-based judge said, adding that “both companies predictably seek to maximize shareholder value.” The Department of Justice is, as required by law, the voice for consumers who would otherwise have no voice. ”
There are no plans for a merger, and both JetBlue and Spirit remain as they are. In short, air travelers shouldn't expect much change anytime soon.
However, JetBlue and Spirit disagreed with the ruling and said they were considering whether to appeal. JetBlue, the nation's sixth-largest airline by revenue, said the partnership was necessary to better compete with larger rivals.
The ruling could also prompt Frontier Airlines to try again to buy Florida-based Spirit. Two low-cost airlines announced cash and stock deals in 2022, but JetBlue won the bidding war with an all-cash offer.
What is the regulatory outlook for such mergers?
Tuesday's ruling was a victory for the Biden administration, which has been active in blocking mergers in several industries, including health care, video games and publishing, saying such consolidation would harm consumers.
Attorney General Merrick Garland said Tuesday that the Justice Department “will continue to vigorously enforce antitrust laws to protect American consumers.”
The administration's victory in court could increase its chances of challenging Alaska Airlines' proposed acquisition of Hawaiian Airlines.
The Justice Department has faced criticism in the past for greenlighting a wave of mergers. When it comes to air travel, the previous administration authorized a series of deals that consolidated the industry until his four airlines – American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines – controlled about 80% of the domestic market. .
What happened to JetBlue and Spirit stock prices?
Spirit stock plunged 47% on Tuesday. JetBlue stock rose 5%.