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JetBlue Casts Doubt on $3.8 Billion Merger with Spirit Airlines as Sunday Deadline Looms

 |  January 28, 2024

JetBlue Airways has thrown the future of its $3.8 billion merger deal with Spirit Airlines into uncertainty by suggesting it may not be able to meet certain conditions required as part of the agreement. The airline announced on Friday that, due to unspecified reasons, it has informed Spirit that the merger agreement might be terminated as early as Sunday.

This announcement has sent shockwaves through the market, with shares of Spirit Airlines plunging 9.5% to $6.54 on Friday afternoon. This comes on the heels of a tumultuous month for Spirit, during which its stock has witnessed losses of about 55%, triggered by a U.S. judge’s decision to block the merger deal.

In response to JetBlue’s statement, Spirit Airlines countered that there is no valid basis for terminating the merger agreement. The low-cost carrier emphasized its commitment to fulfilling its obligations under the agreement and expects JetBlue to do the same.

Without the JetBlue deal, Spirit Airlines faces a challenging road ahead. The ultra-low-cost carrier has been grappling with weak demand in its key markets as it strives to return to sustainable profitability. Some industry analysts have even speculated that the company could face bankruptcy if it fails to secure its finances.

Read more: JetBlue Urges Federal Court Approval for Spirit Airlines Acquisition

Spirit has been actively exploring options to refinance its 2025 debt maturities but maintains that it is not pursuing or involved in a statutory restructuring. Last week, the airline disclosed that compensation from supplier Pratt & Whitney for several grounded jets would be a significant source of liquidity over the next few years.

The merger hit a major roadblock earlier this month when a U.S. judge blocked the planned union with JetBlue, citing concerns that the proposed deal could threaten competition in the U.S. aviation market and harm ticket prices. Both JetBlue and Spirit have expressed their intent to appeal the ruling.

The deadline for the closure of the merger deal is January 28, according to the agreement. However, as of Friday, regulatory approval is still pending, and if not received by the deadline, an automatic provision extends the deadline until July 24, 2024. The fate of the deal now hangs in the balance as regulators continue to deliberate on its approval.

Source: WSJ