Spirit Airlines shares fell 52% on Tuesday after a federal judge in Boston rejected JetBlue’s proposed $3.8 billion acquisition of the cheap carrier.
As a result of the above Findings of Fact and Conclusions of Law, the Defendant Airlines, their servants, employees, agents, and anyone else working with either of them is permanently forbidden from carrying out the agreed upon merger as of July 28, 2022. This order was filed with the court on Tuesday.
The decision raised various worries, including higher costs for fliers, particularly Spirit’s customers, and huge debt for JetBlue (JBLU).
Spirit Airlines Shares Plunge After Judge Blocks JetBlue Merger
JetBlue shares rose 3% on Tuesday afternoon.
In March, the US Justice Department filed a lawsuit to prohibit the merger, marking the first time in more than 20 years that the government attempted to block a US airline merger.
Since assuming office, the Biden administration has claimed that greater competition among businesses, particularly in the aviation industry, is necessary to reduce consumer costs. Spirit’s (SAVE) low-base fare business model, which costs consumers extra for everything, including carry-on luggage, encourages larger carriers to provide a percentage of their seats at the lowest feasible price.
“If not prevented, the merger of JetBlue and Spirit will result in higher tickets and fewer options for tens of millions of passengers across the country. “The Justice Department is suing to stop that from happening,” Attorney General Merrick Garland stated in March. “Companies in every industry should understand by now that this Justice Department will not hesitate to enforce antitrust laws and protect American consumers.”
Spirit Airlines Shares Plunge After Judge Blocks JetBlue Merger
JetBlue contended that the merger would create a new, stronger rival to the four larger airlines, lowering rather than raising fares.
Before this deal was announced, the US airline sector had undergone mergers and consolidations for almost 20 years. The ten major airlines in 1999 were consolidated into four major carriers — American Airlines, United, Delta Air Lines, and Southwest Airlines — through a series of transactions, frequently as part of a bankruptcy filing. These four major airlines handle over 80% of the country’s air traffic.
The acquisitions have resulted in a considerably more successful US airline business but far fewer options for US air travellers, perhaps resulting in higher rates.
Spirit Airlines Shares Plunge After Judge Blocks JetBlue Merger
The Biden administration has taken a far stronger stance against mergers and acquisitions, notably in the aviation industry. Before this arrangement, it launched a federal lawsuit challenging American and JetBlue’s cooperation in the Northeast United States. That cooperation was dissolved while JetBlue attempted to obtain approval to purchase Spirit.
Another merger is being considered in the US airline industry: a $1.9 billion plan to unite Alaska Airlines and Hawaiian Airlines.
Hawaiian Holdings shares dipped 2.9% on Tuesday afternoon.
SOURCE – CNN
