[ad_1]
![Deal grounded.](https://i.kinja-img.com/image/upload/c_fit,q_60,w_645/bf7b9077f5bc4ea0925ca3b77ece12c0.jpg)
JetBlue’s takeover of low-cost rival Spirit Airlines remains on the runway, thanks to a court ruling that blocked the merger Tuesday (Jan. 16).
And that sent Spirit’s stock plummeting.
Spirit and JetBlue have said their proposed $3.8 billion tie-up would create a serious competitor to the four biggest US airlines, helping bring down fares. But in his decision, US District Court judge William Young disagreed, arguing that the deal would in fact hurt competition and drive up prices for consumers who can least afford it.
The decision sent Spirit’s stock into a downward spiral. The company’s shares lost more than 50% of their value before gaining back 3%. The stock closed down 47% on the day, to $7.92. JetBlue stock gained almost 5% to close at $5.13.
The ruling comes after the Department of Justice sued to stop the merger last March, as part of a push to halt deals that the Biden administration regards as anti-competitive.
“JetBlue’s plan would eliminate the unique competition that Spirit provides—and about half of all ultra-low-cost airline seats in the industry—and leave tens of millions of travelers to face higher fares and fewer options,” the DoJ alleged at the time.
Spirit is on the hook for almost $500 million
Spirit and JetBlue, which launched their bid to become America’s fifth-largest carrier in 2022, both said they disagreed with the ruling and are weighing what to do next. If the deal falls apart, Spirit is on the hook to pay JetBlue $70 million and its shareholders $400 million.
This setback for Spirit and JetBlue could also have fallout for other proposed airline industry mergers. One potential casualty is Alaska Airlines’ planned $1.9 billion takeover of Hawaiian Airlines, which might be tougher to close after the feds’ courtroom victory.
[ad_2]
Source link