Topline
Federal prosecutors filed an antitrust lawsuit against JetBlue to prevent its blockbuster $3.8 billion merger with Spirit Airlines on Tuesday, preventing what would be the country’s fifth-largest airline as Spirit’s messy saga to find a strategic partner drags on.
The Biden Administration appears set to block a marriage between JetBlue and Spirit.
Key Facts
“JetBlue’s plan would eliminate the unique competition that Spirit provides—and about half of all ultra-low-cost airline seats in the industry—and leave tens of millions of travelers to face higher fares and fewer options,” U.S. prosecutors wrote in the complaint filed in Massachusetts federal court.
Bloomberg reported Monday the Justice Department could sue to block the transaction as soon Tuesday, citing sources familiar with the legal proceedings, and JetBlue CEO Robin Hayes confirmed to the Wall Street Journal his company expected the suit.
JetBlue’s plan for Spirit would bring “higher prices for those who can still afford to make their way onto the plane,” the suit alleges.
Shares of both airlines were little changed Tuesday, though Spirit stock sank 9% report Monday, while JetBlue jumped 2%.
Key Background
JetBlue now hopes to close its acquisition early next year, a spokesperson said in an emailed statement Monday. The Transportation Department is simultaneously planning to prevent the transfer of Spirit’s airline license to JetBlue, according to Bloomberg, which would effectively sound the death knell for the transaction. Spirit shareholders approved the merger with JetBlue last October valuing Spirit shares at $33.50, a nearly 50% premium from its Monday price. That agreement came just eight months after Spirit initially agreed to merge with fellow discount airline Frontier, later muddied by JetBlue’s hostile takeover bid launched last May. Politico reported last month that the Department of Justice planned to file an antitrust lawsuit against JetBlue and Spirit. JetBlue has pushed back on claims of anticompetitive behavior, releasing a memo Monday that argued a JetBlue-Spirit merger would make the newly combined airline more competitive with the four biggest U.S. airlines—Delta, American, United and Southwest.
Surprising Fact
JetBlue and Spirit are the 34th and 37th largest airlines in the world by market capitalization, respectively, despite being among the most popular U.S. airlines. That’s largely due to each companies’ slumping bottom lines compared to competitors, with JetBlue’s $72 million profit and Spirit’s $12.6 million in profit in the most recent quarter comparing unfavorably to industry leader Delta’s $828 million profit.
Further Reading
JetBlue Sweetens Its Bid—But Spirit Airlines Says It Still Prefers Its Other Suitor (Forbes)
JetBlue And Spirit Take Their Bickering To Shareholders (Forbes)
JetBlue Goes Hostile In Takeover Bid Of Spirit Airlines (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/03/07/feds-sue-jetblue-over-its-38-billion-merger-with-spirit/