Wednesday, January 17, 2024
Spirit Airlines‘ stock plummets 60% after a judge blocks JetBlue‘ $3.8B takeover, citing harm to low-fare global travelers and DOJ’s antitrust concerns.
On Tuesday, shares of Spirit Airlines plunged dramatically, experiencing a drop of up to 60%, following a decision by a Boston-based federal judge to halt JetBlue Airways’ planned acquisition worth $3.8 billion.
This merger, if successful, would have created the fifth biggest global airline. However, the Justice Department intervened in March of the previous year, filing a legal action to prevent the merger, citing concerns that it would lead to increased fares for budget-focused travelers.
In his judicial opinion, Judge William Young highlighted the negative impact the merger would have on global passengers who depend on Spirit’s competitively low prices. He noted that since 2017, Spirit’s fare rates have been consistently lower than those of JetBlue and other established international airlines.
The proposed acquisition of Spirit Airlines, announced in 2022, was the result of a prolonged contest between Frontier and JetBlue. However, the deal quickly attracted federal attention.
The Department of Justice (DOJ), maintaining a firm stance on antitrust issues, has recently taken several major corporations to court, including Google. In a similar vein, the Federal Trade Commission (FTC) has been active in challenging large companies, accusing entities like Amazon of operating in a near-monopoly fashion.
The airline sector plays a significant role in this narrative. The DOJ, along with Judge Young, pointed out that the industry has seen a wave of consolidations, leading to a market dominated by a few players.
Presently, American, United, Delta, and Southwest command roughly 80% of the U.S. aviation market.
Judge Young, in his Tuesday opinion, described the aviation industry as an oligopoly, increasingly concentrated due to several mergers in the early 21st century, leaving a small group of firms in command of the majority of the market.
Following the announcement about the blocked deal, JetBlue’s stock experienced a surge, increasing by 12% to $5.33 per share, and is currently trading at approximately $5.01.
JetBlue and Spirit, in a joint statement, expressed their disagreement with the judge’s ruling and are contemplating their future course of action.
The airlines stated, “We still believe that our merger presents the best chance to boost competition and options by delivering low prices and outstanding service to more consumers across more markets, while also enhancing our ability to compete with the leading U.S. carriers.” They added that JetBlue’s decision to end the Northeast Alliance and its commitment to substantial divestments have sufficiently addressed the anti-competitive concerns raised by the Department of Justice.
Sunday, April 28, 2024
Sunday, April 28, 2024
Sunday, April 28, 2024
