Key Takeaways
- Spirit Airlines stock was down about 50% in afternoon trading after a judge blocked a planned merger with JetBlue.
- The U.S. Department of Justice had sued to block the deal, saying it would stifle competition and hurt consumers.
- Judge William Young said “cost-conscious” travelers would suffer if the deal went through.
Spirit Airlines (SAVE) shares dumped more than 50% on Tuesday after a judge blocked its proposed merger with rival JetBlue (JBLU).
JetBlue’s planned $3.8 billion acquisition of discount airline Spirit would have created the fifth-largest carrier in the country. The two companies said the merger would help them to scale and compete with larger rivals such as United Airlines (UAL) and Delta (DAL).
JetBlue said in September it would sell off Spirt’s assets at Newark Liberty and Boston Logan airports, in an attempt to win regulatory approval. That move came six months after the U.S. Department of Justice (DOJ) had sued to block the proposed merger, arguing that the deal would “allow JetBlue to eliminate its largest” budget airline rival.
The DOJ said in its legal action that consumers benefit from a “Spirit Effect,” whether they fly with the airline or not.
U.S. District Court Judge William Young agreed with the DOJ, saying the deal would “harm cost-conscious travelers who rely on Spirit’s low fares.”
JetBlue shares climbed more than 6% on the news but are still down more than 1% year-to-date.