Shares of Spirit Airlines (SAVE.N) plunged 17% after a U.S. judge rejected its $3.8 billion merger with JetBlue Airways (JBLU.O). This marks the second day of significant losses, totaling about 23% for Spirit. The court’s decision has thrown Spirit into uncertainty, prompting discussions about potential bankruptcy or finding an alternative buyer.
The judge sided with the U.S. Department of Justice, expressing concerns that the merger would harm consumers. Spirit’s struggle with profitability, aggravated by increased operating expenses and ongoing supply chain issues, adds to its financial woes. Analysts suggest bankruptcy as a potential move to restructure and emerge as a financially resilient airline.
The blocked merger leaves both airlines facing critical decisions. JetBlue, expecting to convert Spirit’s planes and charge higher fares, also witnessed an 8% decline in its shares. Analysts now view the likelihood of the merger happening as very low, citing regulatory challenges even if the airlines decide to appeal.
Spirit, already grappling with issues related to RTX’s Pratt & Whitney Geared Turbofan engines, is further burdened by excess capacity in key markets, impacting pricing power. Without the merger, J.P.Morgan equity analyst Jamie Baker sees little valuation support for Spirit.
The airlines have the option to appeal the ruling, and in a joint statement, JetBlue and Spirit are evaluating their “next steps as part of the legal process.” The uncertainty casts a shadow on the future of both carriers, with Spirit’s shares down approximately 60% since the merger block.