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JetBlue & Spirit Merger Blocked by DOJ

industrials news Jan 19, 2024

Biden’s anemic antitrust push finally nets a W



JetBlue and Spirit Airlines continued falling this morning after a judge sided with the Department of Justice and blocked their proposed merger. Let’s break it down:



The Department of Justice originally sued to block the $3.8 billion merger due to concerns that Jet Blue and Spirit joining forces would harm ticket buyers. Both airlines compete for the budget crowd and that competition potentially keeps prices in check. However, this merger was also one last lifeline for Spirit, so blocking the merger is wreaking havoc on their stock price.



Spirit was having existential issues keeping up with rising costs. As a budget airline, they operated with razor-thin margins that were wiped out by the inflationary spiral that hit in 2022. Spirit was basically being kept alive only via hopes that this merger would go through. Meanwhile, JetBlue stock jumped on this news considering the market thought they were massively overpaying for their part of the deal. 



Compared to the cases that the DoJ has lost recently, this one is borderline insignificant. The JetBlue/Spirit deal would only create the 5th largest airline in the U.S. with significant competition. However, this is a huge deal for Spirit as their best option now looks like bankruptcy. While JetBlue stock is flat after a decent bump, Spirit dropped an additional 14% in early trading after ending yesterday down 50%.