According to an exclusive report by Reuters, Spirit Airlines (SAVE.N) is reportedly urging JetBlue Airways (JBLU.O) to challenge a federal judge’s decision that blocked their merger, the joining of the sixth and seventh largest airlines in the U.S. This comes from individuals close to the matter.
Spirit Airlines Urges JetBlue To Appeal Their Blocked Merger
The ruling by U.S. District Judge William Young, which occurred on Tuesday, halted Spirit’s proposed $3.8 billion sale to JetBlue. The decision, aligning with antitrust regulators’ concerns, suggested that the merger could increase consumer airfares. Following this ruling, Spirit’s stock value plummeted over 60%.
Additionally, the financial stability of Spirit Airlines is under scrutiny, evidenced by a significant drop in its bond values. These bonds fell from around 75 cents on the dollar to just 50 cents amid worries about the airline’s capacity to manage its $1.1 billion debt due in September 2025.
Spirit is reportedly asserting to JetBlue that their contractual agreement necessitates exhausting all legal avenues to finalize the deal, including appealing the judge’s decision. However, JetBlue’s stance on appealing remains undecided.
The airline is weighing the potential success of an appeal and is also considering the considerable decline in Spirit’s business performance since the initial agreement in July 2022.
There’s speculation that JetBlue might opt to pay a $470 million termination fee to Spirit and its shareholders, but this would require demonstrating that they have met their contractual obligation to make every effort to complete the deal.
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JetBlue had previously attempted to address regulatory concerns by proposing to divest gates and slots at major airports, including New York City, Boston, Newark, New Jersey, Fort Lauderdale, and Florida.
Following the setback with the deal, sources reveal that Spirit is exploring options to refinance its debt. The low-budget airline, which was significantly impacted by the COVID-19 pandemic, has faced challenges in recovering due to its pricing model and the rise in fuel prices. This has increased its net debt from $3.3 billion to $5.5 billion over two years.
Moreover, Spirit is contending with issues related to RTX’s (RTX.N) Pratt & Whitney Geared Turbofan (GTF) engines, which have forced it to ground several planes, impacting its profitability. The airline is also dealing with increased pilot pay rates. In contrast, JetBlue, which operates on a higher budget than Spirit, has managed to fare better in these challenging conditions.
