The airline industry has been hit hard by the COVID-19 pandemic, with many airlines struggling to stay afloat as travel demand plummeted. However, as the world begins to recover, airlines are gearing up for a surge in demand, which could lead to an increase in ticket prices and a decrease in options for travelers.
In the midst of this, the Department of Justice filed an antitrust lawsuit on Tuesday to block JetBlue’s planned $3.8 billion takeover of Spirit Airlines. The DOJ alleges that the merger of low-cost airline rivals would increase ticket prices and lessen options for travelers, which would ultimately harm competition and be against the public interest.
Critics of the deal have been vocal about their concerns, arguing that it would be detrimental to working and middle-class Americans who rely on ultra-low-cost carriers to travel for personal reasons. Attorney General Merrick Garland echoed these sentiments, stating that “this merger would be particularly harmful for travelers who rely on what are known as ‘ultra-low-cost carriers’ in order to fly.”
JetBlue launched a hostile takeover bid for Spirit Airlines in May 2022 and urged Spirit’s shareholders to rebuff an earlier deal to merge with Frontier Airlines. Spirit’s shareholders ultimately approved the merger with JetBlue in October 2022 after the Frontier deal fell apart.
JetBlue’s takeover bid includes a $400 million break-up fee that would be paid to Spirit shareholders if the deal is ultimately blocked by regulators. However, with Massachusetts, New York, and the District of Columbia joining the DOJ’s lawsuit, the future of the deal remains uncertain.
Investors have been expecting this deal to fail, as JetBlue’s $33.50 per share bid represents a 105% premium to where Spirit shares closed trading on Monday. While the companies have offered certain concessions to gain antitrust approval, including the divestiture of Spirit operations at airports in Newark and Boston, it remains to be seen whether these concessions will be enough to satisfy regulators.
The airline industry is facing increased scrutiny as delays, cancellations, and soaring ticket prices frustrate travelers who are eager to hit the skies once again. As the DOJ continues to investigate the JetBlue-Spirit merger, it remains to be seen whether the deal will go through or not.
