JetBlue Airways is considering ending its attempt to purchase Spirit Airlines, a low-cost carrier, as soon as this weekend due to a federal judge’s block on the deal. This news sent shares of Spirit tumbling, prompting a sharp reaction from the company, which insists that there is no basis for terminating the merger agreement.
The Justice Department had sued to block JetBlue’s proposed $3.8 billion purchase of Spirit, arguing that the deal would lead to higher fares by eliminating Spirit, the nation’s largest low-cost airline. JetBlue responded with a regulatory filing, stating that certain conditions of the deal might not be met by the deadline set in their agreement, which could result in the deal being terminated. However, Spirit has countered with its own filing, maintaining that there is no reason to terminate the deal. Shares of Spirit Airlines fell 13.4% during Friday’s session, while JetBlue Airways Corp. gained 3.6%.
JetBlue and Spirit have both experienced financial struggles and slower recovery from the pandemic compared to some other airlines. Spirit is dealing with rising costs, softer demand for its low-fare, high-fee business model, and issues with its Airbus jets, while JetBlue has lost a substantial amount of money since the start of the pandemic. Additionally, should the deal fall through, JetBlue could face a $470 million reverse breakup fee.
