Spirit Airlines stock tanking blocked merger

Federal judge blocked JetBlue's $3.6 billion acquisition of Spirit. Spirit stock fell while JetBlue's rose. Airlines to 'evaluate next steps.'

In 2023, the aviation industry was abuzz with the news of JetBlue's plans to acquire Spirit for a whopping $3.6 billion. This move, if successful, would have been the biggest industry shakeup since the pandemic. However, a federal judge sided with the Department of Justice, ruling that the deal would create an anticompetitive environment and subsequently blocked the proposed merger on January 16th.

U.S. District Judge William Young acknowledged the loyalty of Spirit's dedicated customers and expressed his decision as a nod to them. The news of the blocked merger sent shares of Spirit plummeting by more than 47% in after-hours trading, while JetBlue's stock saw a 5% rise the following morning.

Spirit, a low-cost airline, has been struggling to turn a profit, with its stock falling by over 56% in the last six months. Despite generating $1.2 billion in revenue, the airline reported a net loss of $157.6 million in the third quarter. In contrast, JetBlue reported $2.4 billion in revenue and a net loss of $129 million during the same period.

Industry analysts have suggested that Spirit's best course of action might be to file for Chapter 11 bankruptcy and undergo a liquidation sale due to its longstanding financial troubles. JetBlue and Spirit have expressed their disagreement with the ruling and are evaluating their next steps, with the potential for further legal action.

While JetBlue is now reassessing its growth plans, the market has reacted positively to the news of the merger block. However, it has also left Spirit vulnerable at a challenging time for the airline industry. The future of both airlines remains uncertain as they navigate the aftermath of this decision.