Spirit Airlines (NYSE: SAVE) stock plummeted over 13% on Friday as JetBlue expressed skepticism regarding its merger agreement with the low-cost carrier.
On Friday, JetBlue Airways (NASDAQ: JBLU) cast uncertainty over the viability of its $3.8 billion merger agreement with Spirit Airlines. The airline expressed concerns about meeting specific conditions stipulated in the deal, citing unspecified reasons that could pose challenges to its completion.
In light of these events, JetBlue announced that it had notified Spirit about the possible dissolution of the merger agreement as early as Sunday.
JetBlue said it is actively exploring options within the agreement and remains committed to fulfilling its merger obligations unless the deal is officially terminated.
Spirit responded by stating there was no justification for ending the merger agreement. The company affirmed its commitment to fulfill its obligations and expects JetBlue to do the same.
Last week, a federal judge supported the Justice Department’s stance and halted JetBlue’s intended $3.8 billion acquisition of Spirit. The Justice Department initiated a lawsuit to prevent the merger, arguing that it would escalate fares by eliminating Spirit, the country’s leading budget airline.
Both airlines have registered their appeal to challenge the decision in a superior court.
Financial Struggles of JetBlue and Spirit
JetBlue Airways (NASDAQ: JBLU) and Spirit Airlines (NYSE: SAVE) have faced financial hardships, and their recovery from the pandemic has been slower compared to other airlines. Since 2020, JetBlue has incurred a loss of $2.1 billion, while Spirit has reported a loss of $1.7 billion.
Spirit is grappling with rising costs, a decline in demand for its combination of minimal fares and elevated fees, and the grounding of numerous Airbus jets due to issues with Pratt & Whitney engines. The company is tasked with devising a strategy to settle or refinance its impending debt of $1.1 billion due next year.
Spirit endeavored to merge with Frontier Airlines, another budget carrier, early in 2022. However, JetBlue triumphed in the competitive bidding, effectively marginalizing Frontier.
The potential collapse of the deal due to governmental objections could impose a $470 million reverse breakup fee on JetBlue, with $70 million allocated for Spirit and $400 million for its shareholders.
Spirit Airlines (NYSE: SAVE) Stock Reaction
SAVE stock declined -13.43% on Friday. The traders had exchanged hands with 48,095,115 (48.09 million) shares compared to the average daily trading volume of 14.58 million.
