JetBlue Airways’ proposed merger with Spirit Airlines has been blocked by a US judge who ruled with the Department of Justice (DoJ), saying the airlines had failed to prove that the deal would not “substantially lessen competition.”
District Court Judge William Young ruled against the merger following a trial in November where JetBlue had sought to argue that the $3.8bn merger would allow it to offer lower fares and compete with the big four airlines in the US.
Young’s decision was celebrated by US Attorney General Merrick Garland who said: "Today’s ruling is a victory for tens of millions of travellers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward."
While JetBlue had signed divestment agreements with airlines such as Frontier and Allegiant and decided not to appeal against another ruling blocking its Northeast Alliance with American, in the hope of appeasing concerns over a lack of competition at certain airports, its efforts were not enough to save the deal.
A statement from the two airlines said they would now evaluate next steps after reviewing the court’s decision: “We continue to believe that our combination is the best opportunity to increase much-needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant US carriers.”
The court’s decision won't be the ideal start for JetBlue’s new CEO Joanna Geraghty, the airline’s current president and COO, who will step in to replace Robin Hayes in February and may have to make the decision on whether to appeal the ruling.
While Young sided with the DoJ against the merger, the judge stopped short of stating that the two airlines could never try to merge again, saying that would be interfering with the free market with unknown effects, meaning that the two companies may attempt to come up with a different deal to try again.
Despite this, Young’s ruling also described the current deal as doing “violence to the core principle of the antitrust law” of protecting the US’ markets from harm, going on to state in his conclusion: “Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you.”
While JetBlue's stock went up nearly 5% after the announcement, Spirit's share price took a significant hit by the ruling, dropping almost 50% by the end of Tuesday 16 January.
The decision could raise fears at Alaska Airlines, which recently announced that it would be acquiring Hawaiian Airlines in a $1.9bn deal that many think will face similar challenges from the DoJ.
