JetBlue Airways said Friday it may pull out of a $3.8 billion acquisition of Spirit Airlines after a federal judge blocked the deal.
The announcement came just a week after JetBlue and Spirit said they would appeal the decision, which was made in an antitrust case brought by the Justice Department.
in a regulatory document On Friday, JetBlue said the deal could be terminated after Sunday if certain conditions were not met. Spirit said in his own presentation that he disagreed with JetBlue and believed there was “no basis to terminate” the agreement.
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 an acquisition by JetBlue would harm travelers. The ruling was a victory for the Justice Department, which under Biden has sought to limit corporate consolidation across the economy.
The agreement has an expiration date of January 28 and, if certain conditions are met, that date is automatically extended to July 24. JetBlue appears to be arguing that Spirit has not held up its end of the deal, allowing JetBlue to walk away from the deal. on Sunday or after.
As part of the merger deal, JetBlue agreed to pay Spirit and its shareholders a combined $470 million if regulators blocked the deal.
Some legal experts said JetBlue’s filing on Friday suggested the company could ultimately try to dispute the $470 million breakup fee. That fee was instrumental in Spirit accepting JetBlue’s offer and abandoning a proposed deal with Frontier Airlines.
“Basically, JetBlue took a gamble,” said Dylan Carson, a former Justice Department antitrust lawyer who now works at the law firm Manatt, Phelps & Phillips.
Spirit will almost certainly challenge any effort by JetBlue to avoid paying the breakup fee in court.
Some antitrust lawyers said JetBlue appeared to have determined that an appeal of the federal judge’s ruling would be costly and time-consuming and could well fail.
“It certainly appears that at this point at least this antitrust division has stopped allowing airline mergers to go ahead unchallenged,” said Dan McCuaig, a former antitrust trial attorney at the Justice Department and now a partner at the law firm Cohen. Milstein.
Spirit’s stock price fell about 10 percent Friday afternoon. Its shares have lost more than half their value since the deal was blocked as investors are concerned about its prospects as a stand-alone business. Spirit is not profitable and has a lot of debt. The airline was also forced to ground some of its planes due to an engine problem.
The stock price of JetBlue, which could save billions of dollars by not filing an appeal and moving forward with the deal, rose about 3 percent Friday afternoon.
Jonnathan Handshoe, airline analyst at CFRA Research, said the merger is in jeopardy at a tumultuous time for the industry. Even though customers have spent more on travel over the past year, the price of fuel and labor have risen and regulators are scrutinizing Boeing and limiting the planemaker’s ability to expand production after a panel exploded a 737 Max 9 aircraft during an Alaska Airlines flight. I fly this month.
“Given today’s presentation, we believe JetBlue will focus on its own future,” Handshoe said.