JetBlue pulls out of Spirit Airlines takeover deal as it seeks to return to profitability.
The hometown airline of New York has decided to pull out of the takeover or merger as they preferred to call it, of the budget airline Spirit both carriers confirmed today.
Pulling out of the deal is costing JetBlue a compensation payment of $69 million, in addition to the $480 million the company has already spent on the project which would have made a big impact on the American aviation industry.
The two airlines have mutually agreed to terminate the $3.8bn deal as the required closing conditions, including receiving necessary legal and regulatory approvals, were unlikely to be met by the merger agreement’s outside date of July 24, 2024.Joanna Geraghty, chief executive officer of JetBlue said: “We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines. 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.”
Following the deal being blocked by a US judge in January on anti-competition concerns, there seemed no way forward for the deal. In a recent shareholders call, the focus for JetBlue was to return to sustained profitability, drive up shareholder value and concentrate on its core strengths. Geraghty added “We have already begun to advance our plan to restore profitability. We look forward to sharing more on our progress in the coming months.” The airline plans to cement its network relevance in its home markets as well as enhance its products and services.
"We are disappointed we cannot move forward with a deal that would save hundreds of millions for consumers and create a real challenger to the dominant "Big 4" U.S. airlines. However, we remain confident in our future as a successful independent airline. We wish the JetBlue team well."
Christie continued, "Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the Guest experience. As we go forward, I am certain our fantastic Spirit team will continue delivering affordable fares and great experiences to our Guests."
Spirit now needs to return to profitability and needs to do it quickly, it will need to refinance within the next year as debts mature. While the merger agreement was in effect, Spirit stockholders received approximately $425 million in total prepayments.
It is expected Spirit will have to start merger negotiations with another small to medium-sized carrier within the next few months if it seeks to carry on as a viable airline partner.
