LaGuardia International Airport Terminal A for JetBlue and Spirit Airlines in New York.
Leslie Josephs | CNBC
A federal judge blocked JetBlue Airways‘ purchase of budget rival Spirit Airlines after the Justice Department sued to stop the merger, alleging it would drive up fares for some of the most price-sensitive consumers.
JetBlue’s proposed $3.8 billion purchase of discounter Spirit would have produced the country’s fifth-largest airline, a deal the carriers said would help them better grow and compete against larger rivals like Delta and United.
“JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” U.S. District Court Judge William Young wrote in his decision. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”
The decision, handed down Tuesday, marks a victory for a Justice Department that has aggressively sought to block deals it views as anticompetitive.
The Justice Department alleged in its lawsuit, filed in March, that JetBlue’s acquisition of the budget airline would force “tens of millions” of passengers to pay higher fares by eliminating Spirit and “about half of all ultra-low-cost airline seats in the industry.”
Spirit shares plunged after the decision was announced and were down 60%, while JetBlue shares swung between gains and losses.
Neither airline immediately commented on the decision.
Spirit Airlines and JetBlue Airways stock after a federal judge blocked the carrier’s proposed merger.
The decision leaves New York-based JetBlue grappling with next steps, tasking incoming CEO Joanna Geraghty with steering the airline on a new path. Geraghty was announced as successor to CEO Robin Hayes after he said earlier this month that he would retire.
JetBlue argued access to Spirit’s similar fleet of Airbus planes would allow it to grow quickly when planes and pilots are in short supply, growth it said it needs to compete against bigger airlines. The airline operates in highly congested airspace in New York and other cities, and had planned to use Spirit as a way to gain access to more routes and travelers.
Years of previous consolidation left United, Delta, American and Southwest in control of about three-quarters of domestic market.
JetBlue planned to remodel Spirit’s yellow planes by removing the branding and seats from the tightly-packed planes to provide more of a full-service model.
“Although Spirit’s yellow aircraft livery would not immediately be repainted as JetBlue planes, at the moment the merger is consummated, Spirit and JetBlue would no longer be competitors,” Young wrote in his decision.
Spirit has grown rapidly in recent years by offering cheap fares and fees for everything else from seat assignments to carry-on luggage.
This is breaking news. Please check back for updates.
