Shares of Spirit Airlines (SAVE -7.17%) have fallen 64.7% this week as of 11:50 a.m. ET Thursday after a federal judge blocked its long-awaited merger with JetBlue Airways (JBLU 7.79%) on antitrust grounds.
The JetBlue-Spirit merger is no more…for now
In a ruling published Tuesday, Boston-based U.S. District Judge William Young struck down the proposed merger. While Young said that the deal would result in “stronger competitive pressure” on larger airlines, he also agreed with a U.S. Department of Justice lawsuit filed in March that asserted the acquisition would result in higher fares for many airline passengers.
“JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” Young wrote. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”
In a letter to employees on Tuesday, JetBlue CEO Robin Hayes insisted his company would be fine in any case.
“If we need to move forward without Spirit, we will invigorate our stand-alone organic plan, continuing to fight for more market share and win customers from the big airlines,” Hayes said
What’s next for Spirit Airlines investors?
Keep in mind the merger isn’t entirely done yet: The judge left the door open for the two airlines to appeal if they choose, saying he’s only blocking the merger “as it currently stands.”
In a joint statement, the airlines said they disagree with the ruling and are evaluating their next steps.
If JetBlue and Spirit don’t appeal the decision, however, it seems Spirit will be in a much more difficult position considering it has historically struggled to achieve sustained profitability as a stand-alone business.
It’s unclear whether its future involves finding another suitor or — in a worst-case scenario — ultimately filing for Chapter 11 bankruptcy restructuring. But it’s hard to blame skittish investors for not sticking around to find out.
Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
