Yesterday started out poorly for Spirit Airlines (NYSE:SAVE), while things fared a little better for JetBlue (NASDAQ:JBLU) as regulators looked to put a halt to a deal between the two. Now, that deal looks unlikely to happen, and the shoes are on the other foot as Spirit is up, but JetBlue is down in Tuesday afternoon trading.
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Yesterday, JetBlue CEO Robin Hayes established a clear position, noting that regulators “…came to the table with their minds made up.” And indeed, that seems true as regulators arrived today with a lawsuit in hand, ready to stop the merger. The $3.8 billion deal between the airline stocks is now on hold and may never recover. The Department of Justice, which filed suit to stop the merger, did have one good point in its favor. It said that, by acquiring Spirit, JetBlue would effectively “…eliminate the largest and fastest-growing ultra-low-cost carrier in the United States.”
Further, the DoJ asserts that JetBlue would ultimately “…abandon Spirit’s business model, remove seats from Spirit’s plans, and charge Spirit’s customers higher prices.” Some here might say that’s putting words in JetBlue’s mouth. After all, JetBlue pointed out, the “…Big Four airlines have a lock on about 80% of the market,” which would limit its ability to hurt consumers no matter what it did. Further, JetBlue notes that having Spirit in its corner would improve its ability to compete with the major airlines, not hurt competition.
Analysts, meanwhile, are taking a wait-and-see approach to both stocks as they are rated as Holds. If the merger were to somehow go through, though, SAVE stock would see significant upside.
