JetBlue and Spirit Airlines cancel $3.8 billion merger over antitrust hurdle.

Written by David Shepardson and Atreya Dasgupta

WASHINGTON (Reuters) – Low-cost carriers JetBlue Airways and Spirit Airlines canceled their $3.8 billion merger agreement on Monday, finding no way forward after a U.S. judge blocked the deal in January over anti-competitive concerns.

A successful deal would have created the fifth-largest airline in the United States and helped Spirit ensure its survival, but the deal has been on its way to collapse since a Boston judge said it would hurt consumers by reducing competition.

The decision is a victory for the Biden administration, which took a tough stance against ties in the aviation sector and said that the deal would boost ticket prices for consumers.

U.S. Attorney General Merrick Garland said JetBlue's decision “is another victory for the Justice Department's work on behalf of American consumers,” saying the merger “would have caused tens of millions of travelers to face higher prices and fewer choices.”

The administration has used antitrust actions and other enforcement efforts to try to lower prices for U.S. residents across many industries.

“With the federal court ruling and continued opposition from the Department of Justice, the likelihood 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 memo seen by Reuters.

“Even if the ruling is overturned on appeal, we simply see no path to obtaining regulatory approval by the required July 24 deadline.”

“We have concluded that current regulatory hurdles will not allow us to close this transaction in a timely manner under the merger agreement,” Spirit CEO Ted Christie said in a statement.

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Under the agreement, JetBlue will pay Spirit $69 million. While the merger agreement was effective, Spirit shareholders received approximately $425 million in total prepayments.

Without the JetBlue deal, Spirit, the seventh-largest US airline, will have a tough road ahead. The ultra-low-cost carrier is facing weak demand in its key markets as it seeks to return to sustainable profitability. Some analysts even indicated that the company may face bankruptcy if it cannot shore up its finances.

Spirit shares fell 14% in late morning trading, while shares of JetBlue, the sixth-largest US airline, rose 4%.

The ruling by US District Judge William Young concluded that the proposed deal would likely harm competition in the US aviation market and could raise ticket prices.

That prompted JetBlue to raise doubts about the future of its deal, saying it may not be able to meet certain conditions required as part of the agreement.

JetBlue has chosen not to appeal a separate ruling that declared its Northeastern partnership with US Airways noncompetitive.

JetBlue, which raised baggage fees last month, said it was working on several near-term efforts to increase revenue by more than $300 million, and said it was on track to realize cost savings of between $175 million and $200 million from its structural cost program and $75 million. dollars in the budget. Maintenance savings from modernizing its fleet.

A judge in May sided with the Justice Department and six states in a lawsuit challenging the joint venture American and JetBlue entered into in 2020, called the Northeast Alliance, to join forces for flights to and from New York City and Boston, and coordinate schedules. timeliness and revenue collection.

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Spirit said it is taking steps to ensure the strength of its balance sheet and ongoing operations and has retained Perella Weinberg & Partners and Davis Polk & Wardwell as advisors.

(Reporting by Atri Dasgupta in Bengaluru and David Shepardson in Washington; Editing by David Gavin, Devika Simnath, Arun Kuyur and Nick Zieminski)

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