LaGuardia International Airport Terminal A for JetBlue and Spirit Airlines in New York.
Leslie Josephs | CNBC
A federal judge has blocked JudBlue Airways' acquisition of budget rival Spirit Airlines after the Justice Department sued to stop the merger, alleging it would raise fares for some of the most expensive consumers.
JetBlue's proposed $3.8 billion purchase of discount Spirit would have created the nation's fifth-largest airline, a deal the carriers have said will help them grow and compete better against larger rivals such as Delta and United.
“JetBlue plans to convert Spirit's flights to the JetBlue layout and charge its customers JetBlue's higher average fares,” U.S. District Court Judge William Young wrote in his decision. “Eliminating Spirit will harm cost-conscious travelers who rely on Spirit's low fares.”
The decision, handed down on Tuesday, marks a victory for the judiciary, which has aggressively sought to block deals it deems anti-competitive.
In its lawsuit filed in March, the Justice Department alleged that JetBlue's takeover of the budget airline would force “tens of thousands” of passengers to pay more by eliminating half of Spirit and “ultra-low-cost airline seats.” business.”
Spirit shares plunged 60% after the results were announced, while JetBlue shares oscillated between gains and losses.
Neither airline was immediately available for comment on the decision.
Check out the chart…
Spirit Airlines and JetBlue Airways Shares A federal judge has blocked the carriers' proposed merger.
The decision puts New York-based JetBlue in the next phase of operations, with incoming CEO Jonah Geraghty tasked with leading the airline on a new path. Geraghty was announced as the successor to CEO Robin Hayes after he announced his retirement earlier this month.
JetBlue argued that Spirit's access to similar Airbus planes would allow it to grow quickly when planes and pilots are in short supply, saying growth would require it to compete against larger airlines. The airline operates in very congested airspace in New York and other cities, and planned to use Spirit to gain access to more routes and passengers.
Previous years of consolidation had left United, Delta, American and Southwest controlling three-quarters of the domestic market.
JetBlue plans to redesign Spirit's yellow planes, removing branding and seats from the tightly packed planes, to offer more of a full-service model.
“Although Spirit's yellow aircraft livery will not immediately be repainted as JetBlue aircraft, the moment the merger is completed, Spirit and JetBlue will no longer be competitors,” Young wrote in his decision.
Spirit has grown rapidly in recent years
This is breaking news. Check back for updates.
