Two U.S. airlines announced that they had mutually terminated a merger agreement that would have created the nation’s fifth-largest airline.
JetBlue Airways agreed with Spirit Airlines “to terminate their July 2022 merger agreement,” according to a statement released Sunday by Jetblue. The two carriers “continue to believe in the procompetitive benefits of the combination” but “mutually agreed that terminating is the best path forward for both companies as required closing conditions, including receiving necessary legal and regulatory approvals, were unlikely to be met by the merger agreement’s outside date of July 24, 2024,” the statement added.
Spirit Airlines released a similar statement on Monday. “After discussing our options with our advisors and JetBlue, we concluded that current regulatory obstacles will not permit us to close this transaction in a timely fashion under the merger agreement,” Ted Christie, Spirit’s president and CEO, said in the statement.
Had the merger succeeded, it would have seen the two low-cost airlines “create a real challenger to the dominant ‘Big 4’ U.S. airlines,” Christie said, referencing American Airlines, Southwest Airlines, Delta Airlines, and United Airlines. Christie claimed the merger would have saved “hundreds of millions for consumers,” according to the statement from Spirit Airlines.
Jetblue‘s Chief Executive Officer Joanna Geraghty agreed, according to Jetblue’s statement. “We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” Geraghty said.
The U.S. government, however, disagreed. “The Justice Department proved in court that a merger between JetBlue and Spirit would have caused tens of millions of travelers to face higher fares and fewer choices. We will continue to vigorously enforce the nation’s antitrust laws,” said Attorney General Merrick B. Garland said in a U.S. Department of Justice (DOJ) press release Monday. Garland hailed the airlines’ joint decision as “yet another victory for the Justice Department’s work on behalf of American consumers,” according to the press release. (RELATED: Biden Has Cracked Down On Big Business Mergers And Monopolies. Are Americans Better Off Because Of It?)
The mutual termination followed the U.S. District Court for the District of Massachusetts’s decision two months ago to block a merger that would have seen Jetblue acquire Spirit for $3.8 billion that would have allegedly harmed competition and violated U.S. antitrust law, the DOJ added.
The Massachusetts court blocked the transaction after a 17-day trial that started in Oct. 2023, the DOJ added. The DOJ alongside the Commonwealth of Massachusetts, the State of New York and the District of Columbia, filed the civil antitrust lawsuit on March 7, 2023, alleging the proposed acquisition violated Section 7 of the Clayton Act, Garland announced on the filing date.
Section 7 of the Clayton Act “prohibits not only the acquisitions of ‘stock’ but also the acquisitions of ‘assets’ where ‘the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly,'” according to the American Antitrust Institute.
Spirit, only recently back to profitability after losses occasioned by COVID-19, could face a new bidding war and risk bankruptcy or liquidation, CNN reported.