JetBlue says it may pull out of its Spirit Airlines acquisition

JetBlue Airways said Friday it may back out of its $3.8 billion takeover of Spirit Airlines after a federal judge blocked the deal.

This announcement came just one week after JetBlue and Spirit announced that they would appeal the decision, which was made in the antitrust case brought by the Department of Justice.

in Regulatory filing JetBlue said Friday that the deal could be terminated after Sunday if certain conditions are not met. The spirit said in his own file It disagreed with JetBlue and believed there was “no basis to terminate” the deal.

A federal judge in Boston blocked the proposed merger on Jan. 16, ruling that Spirit plays an important role in keeping airfares low and that a JetBlue takeover would hurt travelers. The ruling was a win for the Justice Department, which under President Biden has sought to limit corporate consolidation across the economy.

The agreement expires on January 28, and if certain conditions are met, this date will automatically be extended to July 24. JetBlue appears to be arguing that Spirit did not fulfill its end of the bargain, allowing JetBlue to walk away from the deal. On or after Sunday.

As part of the merger agreement, JetBlue agreed to pay Spirit and its shareholders a total of $470 million if regulators block the deal.

JetBlue's filing Friday suggests the company may eventually seek to dispute the $470 million breakup fee, some legal experts said. These fees were instrumental in convincing Spirit to agree to JetBlue's offer and withdraw from the proposed deal with Frontier Airlines.

“JetBlue basically made a bet,” said Dylan Carson, a former Justice Department antitrust lawyer who now works at the law firm Manatt, Phelps & Phillips.

Spirit is certain to challenge in court any effort by JetBlue to avoid paying separation fees.

Some antitrust lawyers said JetBlue appears to have decided that appealing the federal judge's ruling would be costly, time-consuming and might fail.

“It certainly appears at this point at least that the Antitrust Division is done letting airline mergers go unchallenged,” said Dan McCuaig, a former Justice Department antitrust lawyer who is now a partner at the law firm Cohen Milstein.

Spirit's stock price was down about 10 percent Friday afternoon. Its shares have lost more than half their value since the deal was blocked because investors are concerned about its prospects as a stand-alone company. The soul is not profitable and carries a lot of debt. The airline also had to ground some of its planes due to an engine problem.

The stock price of JetBlue, which could save billions of dollars by not pursuing the appeal and going ahead with the deal, rose nearly 3 percent Friday afternoon.

Consolidation is at risk at a turbulent time for the industry, noted Jonathan Handshaw, an airline analyst at CFRA Research. Even as customers have spent more on travel over the past year, fuel and labor prices have risen, and regulators are scrutinizing Boeing and limiting the plane maker's ability to expand production after a flap blew off a 737 Max 9 plane during an Alaska Airlines flight this month.

“Given today’s filing, we believe JetBlue will focus on its future,” Handschau said.