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A federal judge blocked the JetBlue-Spirit merger, sending Spirit shares crashing over 60%.
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“The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”
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The ruling is a major win for the Biden administration, which had sued to stop the deal.
Spirit Airlines shares tanked as much as 60% on Tuesday after a federal judge in Boston blocked JetBlue Airways’ $3.8 billion proposed takeover.
The merger would have produced the fifth-largest airline, and the Justice Department filed a lawsuit back in March last year to stop the deal, alleging it would boost ticket prices for the most cost-conscious consumers.
“The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares,” Judge William Young wrote in the opinion. “Spirit has, since 2017, offered prices consistently lower than JetBlue and the legacy airlines.”
The Spirit deal was announced in 2022 after a months-long battle between Frontier and JetBlue to buy the budget airline — and almost immediately came under federal scrutiny.
The DOJ, doubling down on its antitrust stance, has brought several corporations to court recently, including Google. Another arm of the government, the FTC, has also been cracking down on large companies, alleging giants like Amazon operate like virtual monopolies.
And the airline industry is a big part of that story. The DOJ and Judge Young said that a wave of mergers in the sector has concentrated the market into the hands of a few companies.
In fact, American, United, Delta, and Southwest control about 80% of the US market.
“The airline industry is an oligopoly that has become more concentrated due to a series of mergers in the first decades of the twenty-first century, with a small group of firms in control of the vast majority of the market,” Young wrote in Tuesday’s opinion.
Following the news about the deal, JetBlue stock rocketed up by 12% to $5.33 a share. It’s now trading at around $5.01.
For their part, JetBlue and Spirit said in a statement that they disagree with the judge’s decision and are evaluating next steps.
“We continue to believe that our combination is the best opportunity to increase much needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant US carriers,” the airlines added. “JetBlue’s termination of the Northeast Alliance and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised.”
Read the original article on Business Insider