JetBlue Airways has called off plans to acquire Spirit Airlines and agreed to pay Spirit a $69 million termination penalty, a move coming after a federal judge in January blocked the carriers’ proposed combination on anti-competitive grounds.
New York-based JetBlue and Miramar, Florida-based Spirit signed a termination agreement on 1 March, the carriers say on 4 March.
“Given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently,” says JetBlue chief executive Joanna Geraghty. “We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines.”
JetBlue in 2022 began executing a hostile take-over of discounter Spirit, which at the time was pursuing a plan to be acquired by Denver-based Frontier Airlines. Spirit CEO Ted Christie initially opposed JetBlue’s offer, saying a Spirit-Frontier combination faced a better chance of clearing a US government anti-trust review.
But JetBlue’s terms proved too tempting to Spirit’s shareholders, who overrode Christie and his management team when they voted later in 2022 to move forward with JetBlue. The US Department of Justice sued to block the deal last year, and a federal judge shot down the combination in January.
JetBlue and Spirit initially appealed the ruling but have now scuttled their plan.
“After discussing our options with our advisers and JetBlue, we concluded that current regulatory obstacles will not permit us to close this transaction in a timely fashion,” Spirit CEO Christie says on 4 March. “We are disappointed we cannot move forward with a deal that would save hundreds of millions for consumers… However, we remain confident in our future as a successful independent airline.”
As part of the termination, JetBlue will pay Spirit $69 million no later than 5 March.
The move leaves JetBlue and Spirit alone to compete against four massive carriers – American, Delta Air Lines, Southwest Airlines and United Airlines. JetBlue and Spirit had said they needed to combine to compete.
Spirit, which lost $447 million last year, faces massive looming debt payments and has been saddled with operational disruptions resulting from Pratt & Whitney’s recall of PW1100G powerplants, prompting questions about its viability as a standalone airline.
“Spirit is confident in its strengths and is focused on returning to profitability,” that carrier says on 4 March. “The company has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations, including assessing options to refinance upcoming debt maturities.”
Spirit adds it has hired two companies to help advise on operational and financial matters: investment banking firm Perella Weinberg Partners and law firm Davis Polk & Wardwell.
JetBlue CEO Geraghty insists her airline “has a strong organic plan and unique competitive advantages, including a beloved brand, a unique value proposition and high-value geographies”.
“We have already begun to advance our plan to restore profitability,” she adds.
That plan will involve JetBlue “deepening its network relevance in proven geographies and better segmenting its product offerings to enhance its competitive position – while delivering meaningful cost savings,” the airline says.
Already this year JetBlue pulled back all planned 2024 expansion (it has also been disrupted by PW1100G issues), named Geraghty as CEO (she replaced long-time leader Robin Hayes in February) and re-hired former chief commercial officer Marty St George as president.
JetBlue, which lost $310 million in 2023, intends to reveal more details about its plans during an investor day on 30 May.
