Mar 7, 2023 - Economy

DOJ files lawsuit to block JetBlue's Spirit takeover

JetBlue and Spirit stock price change
Data: Yahoo Finance. Chart: Axios Visuals.

The Department of Justice filed an antitrust lawsuit on Tuesday to block JetBlue's planned $3.8 billion takeover of Spirit Airlines, alleging the merger of low-cost airline rivals would increase ticket prices and lessen options for travelers.

Why it matters: Critics of the deal — which would make JetBlue the fifth-largest domestic airline — have argued that it's against the public interest and would harm competition.

  • It also comes at a time when scrutiny of the airline industry has intensified, as delays, cancellations and soaring ticket prices frustrate travelers, who are expected to hit the skies in droves this year.

What they're saying: "[T]his merger would be particularly harmful for travelers who rely on what are known as 'ultra-low-cost carriers' in order to fly," Attorney General Merrick Garland said.

  • "Those include working and middle-class Americans who travel for personal, as opposed to business, reasons and who must pay their own way," he added.

The big picture: JetBlue launched what is effectively 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 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.
  • Massachusetts, New York and the District of Columbia joined the DOJ's lawsuit.

Our thought bubble, via Axios Pro Rata author Dan Primack: This shouldn't be too much of a shock, given skyrocketing air travel costs and the fact that JetBlue already is the subject of a DOJ suit seeking to stop its alliance with American Airlines.

  • The companies had offered certain concessions to gain antitrust approval, including the divestiture of Spirit operations at airports in Newark and Boston.
  • Investors have been expecting this deal to fail. JetBlue's $33.50 per share bid represents a 105% premium to where Spirit shares closed trading on Monday.

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Editor's note: This article has been updated with quotes from Attorney General Merrick Garland.

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