JetBlue-Spirit merger blocked

JetBlue's merger with Spirit Airlines was blocked by a federal judge on Tuesday, putting an end to a combination that would have seen JetBlue absorb Spirit and scrap the ultra-low-cost carrier's brand.

In the ruling, Judge William G. Young of the U.S. District Court in Massachusetts found that the merger was anti-competitive, agreeing with a U.S. Department of Justice argument that said the merger violated antitrust laws.

The decision was a major blow to JetBlue, which also saw its Northeast Alliance with American Airlines scrapped in antitrust court in 2023.

JetBlue had argued that it needed Spirit's aircraft and crew members in order to supercharge its growth to a size that would allow it to compete with bigger U.S. carriers.

It was not immediately clear whether JetBlue plans to appeal the decision.

In a joint statement, the two airlines said that they disagreed with the ruling.

"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," the airlines said. "We are reviewing the court's decision and are evaluating our next steps as part of the legal process."

Share prices for Spirit fell more than 50%, while JetBlue was up more than 5%.

Judge Young's ruling comes more than five weeks after a monthlong trial closed in Boston on Dec. 5.

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Throughout the initial bid and the trial, JetBlue argued that by absorbing Spirit, it could double its size and compete more effectively with the four major U.S. airlines — American Airlines, Delta Air Lines, Southwest Airlines and United Airlines — that together control about 80% of the U.S. air travel market.

The DOJ, however, argued that the merger would hurt the most price-sensitive consumers, with Spirit's elimination from the market on some routes causing prices to rise. The department sued in March to stop the merger.

While the DOJ has challenged previous mergers between airlines, many were settled. A series of bankruptcies and industry consolidations that led to the current dynamic with four major U.S. airlines — many of which were ultimately allowed by the DOJ — has created a playing field where smaller entrants must merge to survive and prosper, according to JetBlue's lawyers.

During the trial, JetBlue and Spirit also argued that if Spirit were to stop existing, other ultra-low-cost carriers — such as Frontier Airlines, Allegiant Air, Avelo Airlines and Breeze Airways, among others — would fill the void. During the trial, executives from both airlines testified that Spirit, which has struggled to return to profitability following the onset of the COVID-19 pandemic, cannot continue operating in its current form as an ultra-low-cost carrier. This means that even without the merger, the airline would cease to exist as the market force it is today.

The ultimate question at the heart of the trial boiled down to whether the risk of raising the lowest fares on some routes through Spirit's exit would be worth the potential to lower the average airfare across the broader market by putting more pressure on the major carriers.

The DOJ won a similar antitrust case last year against JetBlue's Northeast Alliance with American Airlines. However, that trial involved one of the four major U.S. airlines and occurred while the Spirit merger was on the table.