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Sun. Apr 21st, 2024

In a significant legal setback for JetBlue, a U.S. federal judge, William Young, ruled against the proposed $3.8 billion acquisition of Spirit Airlines on Tuesday.

The judge contended that the merger would substantially diminish competition within the aviation industry. This decision follows the U.S. Justice Department’s previous legal action last year, where they filed a suit opposing the merger, emphasizing potential adverse effects on consumers and a violation of antitrust laws.

Immediately after the announcement of the court ruling, Spirit Airlines experienced a notable decline of 50.1% in its shares, while JetBlue witnessed a 5.0% increase. Both companies responded with a joint statement expressing their disagreement with Judge Young’s decision. They conveyed their intent to review the court’s ruling and assess their subsequent legal options.

JetBlue and Spirit had previously defended their merger, asserting that it would extend the “JetBlue Effect,” historically known for pressuring larger airlines to adopt more affordable fare structures. The airlines insisted that the combined entity would enhance customer benefits and bolster their competitiveness against dominant U.S. carriers. However, Judge Young’s ruling highlighted concerns, stating, “JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” emphasizing the potential harm to cost-conscious travelers who rely on Spirit’s lower fares.

In the broader context, Young acknowledged the increasing concentration within the airline industry due to previous mergers. He argued that the proposed acquisition conflicted with the fundamental principle of antitrust law – safeguarding U.S. markets and their participants from anticompetitive practices. Last year, Attorney General Merrick Garland, during a press conference, warned that the merger would limit choices and drive up ticket prices for passengers nationwide, particularly affecting those relying on ultra-low-cost carriers.

JetBlue faced a similar legal challenge last year when it decided to wind down its alliance with American Airlines, following a U.S. court ruling deeming the joint venture as anti-competitive. This latest ruling adds to the complexity of JetBlue’s strategic decisions in navigating the regulatory landscape of the airline industry.

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