Federal judge on Tuesday banned JetBlue Airways from acquiring Spirit Airlines
Previously, the Ministry of Justice filed a lawsuit demanding a halt to the merger, stating that the transaction would drive the discount airline out of the market, thereby raising ticket prices for price sensitive consumers.
JetBlue Airways has proposed to acquire discounted airline Spirit for $3.8 billion, making it the fifth largest airline in the country. The airline has stated that this deal will help them better develop and compete with larger competitors such as Delta Airlines and United Airlines.
“JetBlue plans to transform Spirit Airlines’ aircraft into JetBlue’s layout and charge its customers a higher average ticket price,” US District Court Judge William Young wrote in the ruling. “Canceling Spirit will harm the interests of cost conscious travelers who rely on Spirit’s low ticket prices.”
The decision announced on Tuesday marks a victory for the Department of Justice, which has been actively seeking to prevent transactions it deems anti competitive.
Attorney General Merrick Garland said in a statement, “Today’s ruling is a victory for millions of passengers, and if the proposed merger between JetBlue and Spirit Airlines is pushed forward, they will face higher ticket prices and fewer options.” “The Department of Justice will continue to vigorously enforce national antitrust laws to protect American consumers.”
In a lawsuit filed by the US Department of Justice in March, it was claimed that JetBlue’s acquisition of this low-cost airline would eliminate Spirit Airlines and “about half of the ultra low-cost airline seats in the industry,” forcing many passengers to pay higher ticket prices.
In recent years, spiritual aviation has developed rapidly, providing cheap ticket prices and expenses, from seat allocation to carry on luggage. This simple and unadorned model has become the favorite laughing point of late night comedians.
“Spiritual Airlines is a small airline. But some people like it,” Yang, appointed by former President Ronald Reagan, wrote in the ruling. “For Spirit’s loyal customers, this is prepared for you.”
After the ruling, the stock price of Spirit Airlines plummeted, falling 47% on Tuesday, while the stock price of JetBlue Airlines rose by about 5%. On Wednesday morning, Spirit Airlines’ stock price fell another 23%, while JetBlue Airlines’ stock price gave up most of Tuesday’s gains.
As of Tuesday’s close, the market value of Spirit Airlines was $666 million, less than one-fifth of JetBlue’s bid. Due to engine manufacturing issues and lower than expected travel demand, this Miramar, Florida based airline has been struggling to address the issue of aircraft grounding.
JetBlue Airlines and Spirit Airlines stated in a joint statement that they do not agree with this ruling and are evaluating the next steps.
The two airlines said, “We still believe that our merger is the best opportunity to increase much-needed competition and choices, bring low ticket prices and high-quality services to more customers in a wider market, and enhance our competitiveness with the dominant airlines in the United States.”
Last year, another US District Court judge in Massachusetts sided with the Department of Justice to prevent JetBlue from establishing a regional alliance with American Airlines
In the northeast, this cooperative relationship enables airlines to coordinate routes and schedules.
JetBlue Airways and Spirit Airlines stated on Tuesday, “JetBlue Airways terminated the Northeast Alliance and committed to a significant asset divestment, eliminating any reasonable anti competitive concerns raised by the Ministry of Justice.”
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