JetBlue Airways announced that it may scrap plans to acquire low-cost airline Spirit Airlines as early as this weekend, sending Spirit shares lower.
NEW YORK — JetBlue Airways warned it could scrap its planned takeover of low-cost airline Spirit Airlines as soon as this weekend after a federal judge blocked the deal, sending Spirit shares plummeting Friday.
Spirit countered that it saw no reason to terminate the contract and would continue to honor its obligations, adding: “We expect the same from JetBlue.”
A federal judge last week sided with the Justice Department and blocked JetBlue’s $3.8 billion bid to buy Spirit. The Justice Department filed a lawsuit seeking to block the merger, arguing that eliminating Spirit, the nation’s largest low-cost airline, would increase fares.
Both airlines have indicated they intend to appeal to a higher court.
JetBlue said in a regulatory filing Friday that it told Spirit that certain terms of the contract may not be met by deadlines set in the airline’s 2022 contract. JetBlue said this could result in the contract being terminated as early as Sunday.
Spirit responded hours later with its own letter disputing JetBlue’s position.
“Spirit believes there is no basis to terminate the Merger Agreement. Spirit will continue to comply with all of its obligations under the Merger Agreement and expects JetBlue to do the same,” Spirit wrote. .
Shares of Miramar, Fla.-based Spirit Airlines fell 13.4% during Friday trading, while JetBlue Airways rose 3.6%.
New York-based JetBlue had argued it needed to buy Spirit to better compete with larger rivals that are growing rapidly and dominating the U.S. air travel market. Together, the two airlines control about 10% of the domestic air travel market, but are still smaller than American Airlines, Delta Air Lines, United Airlines and Southwest Airlines.
JetBlue and Spirit have both struggled financially and have been slower to recover from the pandemic than other airlines. Since the beginning of 2020, JetBlue has lost $2.1 billion and Spirit has lost $1.7 billion.
Spirit is grappling with rising costs, slowing demand for a combination of minimum fares and high fees, and the grounding of dozens of Airbus planes due to engine problems at Pratt & Whitney. It must find a way to pay off or refinance $1.1 billion in debt due next year.
Spirit tried to merge with Frontier Airlines, another low-cost carrier, in early 2022, but JetBlue won the bidding war and pushed Frontier aside.
If the deal falls through due to government opposition, JetBlue could face $470 million in reverse breakup fees, $70 million to Spirit and $400 million to shareholders.