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Fri, Mar 08, 2024

Spirit/JetBlue Marriage Called Off for Good

Merger Canceled Since Timeline Unlikely to Work

The would-be merger between JetBlue Airways and Spirit Airlines is done for good, since the carriers fail to see a way where it could be completed within the shareholders' agreed-upon July 24th deadline.

Despite their attempt to expediently handle the appeals process after the merger's blockage in court, both airlines feel that "terminating is the best path forward for both companies as 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." The duo were going to have their case heard in June, which is cutting it very close to begin with - leaving aside whether the court of appeals would actually reverse their colleagues' decision to abort the merger to begin with.

“We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” said Joanna Geraghty, chief executive officer, JetBlue. “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.”

It's not great news for JetBlue in any case, since they now must pay Spirit $69 million to cut all ties with the fiancee-turned-competitor.

“JetBlue has a strong organic plan and unique competitive advantages, including a beloved brand, a unique value proposition, and high-value geographies,” 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 carrier says it's sitting pretty for the immediate future, citing "multiple near-term revenue initiatives for 2024, including increased distribution and partnerships, expanded loyalty program functionality, network initiatives, and ancillary initiatives, which will deliver over $300 million in revenue benefits." If successful, the carrier thinks it's on track to deliver $175-200 million in cost savings from its structural cost program and $75 million in maintenance savings from its fleet modernization, with additional savings from targeted fixed cost base reductions...which will let it break even on operating margins this year. Hey, airlines are a costly business to be in.

FMI: www.jetblue.com

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