JetBlue and Spirit Airlines announce cancellation of merger agreement

Monday, March 4, 2024

JetBlue (NASDAQ: JBLU) disclosed today the mutual termination of its merger agreement with Spirit Airlines (NYSE: SAVE), initially set in July 2022. Despite both firms recognizing the competitive advantages that the merger would bring, they have collectively decided that discontinuing the merger represents the most favorable direction for each entity. This decision was influenced by the realization that the essential conditions for closing, particularly obtaining the required legal and regulatory clearances, were not expected to be fulfilled by the stipulated deadline of July 24, 2024.

“We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” said Joanna Geraghty, chief executive officer, JetBlue. “We are proud of the work we did with Spirit to lay out a vision to challenge the status quo, but given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently. We wish the very best going forward to the entire Spirit team.”

As part of the termination agreement, JetBlue will compensate Spirit Airlines with $69 million. This settlement effectively concludes all unresolved issues pertaining to the transaction, and it includes a mutual release of any claims between the two companies.

“JetBlue has a strong organic plan and unique competitive advantages, including a beloved brand, a unique value proposition, and high-value geographies,” Geraghty continued. “We have already begun to advance our plan to restore profitability. We look forward to sharing more on our progress in the coming months.”

During the company’s fourth-quarter earnings discussion, JetBlue announced it is taking determined steps towards achieving long-term profitability and enhancing value for its shareholders. This strategy involves a renewed focus on JetBlue’s foundational strengths, including expanding its network in key markets and refining its product offerings to improve its market position, alongside significant cost reduction efforts.

For 2024, JetBlue has outlined several revenue-generating measures expected to bring in over $300 million. These measures include enhancing distribution and forming new partnerships, expanding the functionality of its loyalty program, pursuing network-related opportunities, and launching ancillary revenue projects. Additionally, JetBlue is on course to realize $175-200 million in savings through its structural cost reduction program and anticipates $75 million in savings from fleet modernization efforts, which include maintenance cost reductions. The airline also expects further savings from cuts in fixed costs, setting the stage for potentially breakeven operating margins in 2024. These efforts represent the initial steps in JetBlue’s plan to revamp its organic growth strategy, aiming for lasting profitability that benefits both its crewmembers and investors.

JetBlue plans to host an Investor Day on Thursday, May 30, 2024, to offer more insights into its strategic direction and ongoing initiatives to boost revenue and reduce costs. Additional details about the Investor Day will be communicated to analysts and investors in the weeks ahead.

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