A federal judge has ruled in favor of the Biden administration, blocking JetBlue Airways from acquiring Spirit Airlines in a $3.8 billion deal. The Justice Department filed a lawsuit to prevent the merger, arguing that it would lead to higher fares by eliminating Spirit, the largest low-cost airline in the country. JetBlue, on the other hand, claimed that the merger would benefit consumers by creating a stronger competitor against dominant airlines in the U.S. market.
U.S. District Judge William Young, who oversaw a non-jury trial last year, determined that the government had successfully demonstrated that the merger would significantly reduce competition, violating a century-old antitrust law. In his ruling, Judge Young acknowledged the loyalty of Spirit's dedicated customer base and expressed his decision in their favor.
Following the ruling, shares of Spirit Airlines plummeted by more than 50%, while JetBlue shares experienced an 8% increase. This is the second major setback for JetBlue in federal court within a year, as another judge in the same courthouse had previously blocked a partnership between JetBlue and American Airlines in the Northeast.
The ruling presents a challenge for JetBlue, the sixth-largest airline in the U.S. by revenue, as it now needs to devise an alternative growth strategy. Incoming CEO Joanna Geraghty, who will replace Robin Hayes next month, will be tasked with this responsibility. Hayes had spearheaded both of the now-blocked deals.
This ruling has significant implications for the airline industry, as it underscores the importance of maintaining competition within the market to prevent fare increases. It also highlights the role of antitrust laws in regulating mergers and acquisitions to protect consumers.