JetBlue, Spirit to appeal court’s decision to block planned merger

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JetBlue and Spirit airlines will appeal a federal judge’s decision to block their planned $3.8 billion merger, saying that it would hurt consumers.

The carriers filed a one-page notice of appeal on Friday, just days after Judge William Young blocked what would have been the first airline merger since Alaska Airlines combined with Virgin America in 2016.

Young’s decision was seen as a significant victory for the Biden administration, which has aggressively enforced antitrust law out of concern that some industries have become too concentrated to the detriment of consumers.

The carriers did not offer additional details about their appeal to the U.S. Court of Appeals for the 1st Circuit. But in a joint statement after the decision was issued Tuesday, they said they “continued to believe that our combination is the best opportunity to increase much needed competition and choice by bringing low fare and great service to more customers in more markets while enhancing our ability to compete with the dominant U.S. carriers.”

The Justice Department had no comment on the carriers’ decision to appeal.

JetBlue is the sixth-largest U.S. carrier, while Spirit is ranked seventh. Together they would form the fifth-largest carrier, leapfrogging over Alaska Airlines, which is pursuing a separate merger with Hawaiian Airlines.

In his 113-page decision, Young acknowledged that the combined company could put pressure on the four carriers that dominate the U.S. market (American Airlines, Delta Air Lines, Southwest Airlines and United Airlines), but maintained that the loss of Spirit Airlines would hurt consumers who rely on its low fares. He noted that when Spirit enters a market, rival airlines reduce their prices by 7 to 11 percent on average.

The decision came as both JetBlue and Spirit are facing financial headwinds. The day before the merger trial began, JetBlue reported a $153 million quarterly loss. Spirit has put cost-saving measures into place and has been forced to ground some of its Airbus A320neo aircraft for inspections because of a manufacturing defect tied to engines made by RTX. Last week, however, the carrier said in a filing with the Securities and Exchange Commission that holiday bookings were strong and its revenue for the final quarter of 2023 would be at the higher end of previously issued guidance.

Following the judge’s decision last week, Helane Becker, a managing director and senior research analyst who covers airlines for the investment bank TD Cowen, wrote in a note to investors that given the financial pressures, Spirit might attempt to find another buyer or be forced to file for Chapter 11 bankruptcy protection. Becker said an appeal, however, may give Spirit more time to turn its losses around.

Savanthi Syth, an analyst with Raymond James, wrote in a note that an appeal could take four to five months to resolve.

Under the terms of its deal with JetBlue, Spirit would get paid a $70 million breakup fee while its investors would get paid a $400 million breakup fee.

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