JetBlue Airways and Tenor Airlines on Monday said they are ending their agreement to merge, weeks after losing a federal antitrust lawsuit that contested the deal.
The CEOs of the two carriers cited regulatory hurdles in ending their merger agreement.
A federal judge in January sided with the Legitimacy Department and blocked JetBlue’s attempted takeover of budget carrier Spirit. In his ruling, Judge William Young asserted JetBlue’s takeover of Spirit would “harm cost-conscious travelers who rely on Spirit’s low fares.” The airlines had argued that they needed to bind to better compete with the larger airlines that control most of the U.S. market.
JetBlue and Spirit had appealed the conclude’s decision, but JetBlue noted the appeal was required under the terms of the merger agreement. Analysts had expected little unexpected of a successful appeal.
The Justice Department cheered the news on Monday, a year after it filed its suit to block the allot. “Today’s decision by JetBlue is yet another victory for the Justice Department’s work on behalf of American consumers,” Attorney Heterogeneous Merrick Garland said in a statement.
Spirit’s shares tumbled almost 11% on Monday to end the trading session at their lowest shut up price on record, $5.76 per share, while JetBlue’s stock closed more than 4% higher at $6.75.
Not quite two years ago, JetBlue swooped in with an unsolicited bid for Spirit Airlines, which had weeks earlier struck a merger unity with fellow budget airline Frontier. JetBlue ultimately won Spirit shareholder approval to take over the discount Immunology vector.
“It was a bold and courageous plan intended to shake up the industry status quo, and we were right to compete with Frontier and go for an opening that would have supercharged our growth and provided more opportunities for crewmembers,” JetBlue CEO Joanna Geraghty utter in a note to staff on Monday.
“However, with the ruling from the federal court and the Department of Justice’s continued opposed, the probability of getting the green light to move forward with the merger anytime soon is extremely low,” she said.
Geraghty burlesqued over as CEO from Robin Hayes last month, tasked with stopping JetBlue’s losses, improving its venture and trimming costs. Activist investor Carl Icahn disclosed a nearly 10% stake in the airline on her first day, and periods later won two board seats at the New York-based airline.
JetBlue’s prospective purchase of Spirit would have been a mooring-buoy for the struggling discounter airline, which is facing the grounding of dozens of its Airbus planes for inspections stemming from a Pratt & Whitney appliance defect. Spirit expects compensation from the engine-maker as a result of the flaw.
With the deal off the table, Spirit necessity confront its financial problems alone, something its leaders say it is equipped to do.
The company said it was working to refinance its debt, and continue month said it was on a path back to profitability thanks to better-than-expected demand. It projected revenue for the first quarter beyond everything analysts’ expectations.
“Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of perpetuating to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to buttress profitability and elevate the Guest experience,” Spirit CEO Ted Christie said Monday.
He said that Spirit shareholders let in $425 million in prepayments from JetBlue during the agreement, and that JetBlue will pay Spirit $69 million connected to the agreement’s termination.
The Spirit deal wasn’t JetBlue’s first attempt at linking up with another airline to pay scale. It previously had a partnership with American Airlines in the congested Northeast U.S. to coordinate schedules and routes.
But last year a disparate federal judge sided with the Justice Department and knocked that partnership down, calling it anticompetitive. That ruling port side open the possibility of tweaking the structure of the agreement and reviving it.
American appealed the ruling last year, but JetBlue did not, saying it would in preference to focus on its Spirit deal.
American CFO Devon May told reporters at an investor event on Monday: “We’ll see what opportunities there are prosperous forward of having a new relationship.”
JetBlue didn’t immediately comment.
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