JetBlue Spirit Airlines demergerJetBlue Spirit Airlines demerger
  • JetBlue Airways and Spirit Airlines jointly announced the termination of their planned merger.
  • The decision was attributed to regulatory obstacles, according to statements from the CEOs of both airlines.
  • As part of the agreement’s termination, Spirit is set to receive $69 million, as mentioned by its CEO.

JetBlue Airways and Spirit Airlines jointly announced on Monday the termination of their $3.8 billion merger agreement. This decision comes shortly after the companies faced legal challenges, losing a federal antitrust lawsuit concerning the proposed deal.

The termination resulted from the acknowledgment that obtaining the necessary legal and regulatory approvals essential for the merger by the specified closing date of July 24, 2024, was unlikely. Despite recognizing the potential benefits of the merger, both companies concluded that pursuing independent paths was the most viable course of action.

JetBlue’s CEO, Joanna Geraghty, stated, “We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines. We are proud of the work we did with Spirit to lay out a vision to challenge the status quo, but given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently.”

As part of the termination agreement, JetBlue will make a payment of $69 million to Spirit. Geraghty emphasized JetBlue’s strong organic plan, highlighting the airline’s unique competitive advantages, including a beloved brand, a distinctive value proposition, and strategic geographical positioning.

Geraghty also announced an Investor Day scheduled for Thursday, May 30, 2024, during which JetBlue will provide additional details on its long-term strategy, as well as ongoing revenue and cost initiatives.

The CEOs of JetBlue and Spirit cited regulatory hurdles in ending their merger agreement. The carriers contended they needed to combine to better compete with large airlines that control most of the U.S. market.

Earlier, a judge said no to JetBlue’s attempt to take over Spirit, stating that it would harm people who look for Spirit’s affordable fares. Even though JetBlue and Spirit appealed this decision, it seemed unlikely that they would win.

On Monday, Spirit’s shares dropped by 14%, while JetBlue’s stocks went up a little. Almost two years ago, JetBlue made an unexpected offer to buy Spirit, which was already planning to merge with another budget airline called Frontier. Although JetBlue had the approval of Spirit’s shareholders to take over, the court and the Department of Justice were against it.

JetBlue’s CEO, Joanna Geraghty, shared that the chances of the merger being approved were very low due to the court’s decision and the Department of Justice’s opposition. She mentioned that the initial plan was bold but, with the court ruling and continued opposition, it was highly unlikely that the merger would be given the green light anytime soon.

Joanna Geraghty took over as CEO recently and is working on turning JetBlue’s losses into profits, improving operations, and cutting costs. Activist investor Carl Icahn also bought a significant stake in JetBlue and won two board seats.

The cancellation of the deal means Spirit has to deal with its financial problems on its own. The airline is addressing these issues by working on refinancing its debt and expects to become profitable again soon.

Despite the deal falling through, Spirit’s CEO, Ted Christie, said they were prepared to continue as a standalone business. Spirit shareholders received $425 million in prepayments from JetBlue, and JetBlue will pay Spirit $69 million due to the termination of the agreement.

By Jammy

One thought on “JetBlue, Spirit Airlines end $3.8 billion merger talks”
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