Spirit Airlines, JetBlue merger blocked federal judge. Here's why.

Judge sides with Biden administration, blocking JetBlue from buying Spirit Airlines, saying it would reduce competition and raise fares.

A federal judge has ruled in favor of the Biden administration, blocking JetBlue Airways from acquiring Spirit Airlines for $3.8 billion, citing concerns that the deal would reduce competition in the airline industry.

The Justice Department had filed a lawsuit to prevent the merger, arguing that it would lead to increased airfares by eliminating Spirit Airlines, the largest low-cost carrier in the United States.

JetBlue expressed disagreement with the ruling and is considering whether to appeal. The New York-based airline contends that the acquisition is necessary for it to effectively compete against larger rivals that currently dominate the U.S. air travel market.

Despite JetBlue's stance, the judge's decision represents a victory for the Biden administration, which has been actively opposing consolidation across various industries, claiming that it negatively impacts consumers. In the case of the airline industry, the Justice Department argued that allowing JetBlue to acquire Spirit would particularly harm travelers who rely on Spirit's affordable fares.

U.S. District Judge William Young, who presided over a non-jury trial, concluded that the government had successfully demonstrated that the merger would significantly diminish competition and violate antitrust laws.

Following the ruling, shares of Spirit Airlines Inc. plummeted by more than half, while JetBlue's shares saw an 8% increase. This marks JetBlue's second major setback in federal court in less than a year, as another judge in the same Boston courthouse previously blocked a partnership between JetBlue and American Airlines in the Northeast.

The ruling now presents JetBlue with the challenge of developing an alternative growth strategy. Incoming CEO Joanna Geraghty, who will replace Robin Hayes, will be tasked with this responsibility. Additionally, the decision could potentially open the door for Frontier Airlines to pursue another attempt to acquire Spirit Airlines, as the two budget carriers had previously announced a deal in 2022, only to be outbid by JetBlue.