JetBlue said Wednesday that it won’t appeal a federal court finding that its Northeast Alliance violates antitrust laws and will wind down the venture with American “over the coming months.” Instead, the carrier plans to focus on saving its $3.8 billion combination with Spirit, which has also been challenged for allegedly violating antitrust statutes.
“We hope taking the U.S. Department of Justice’s misplaced concerns about our partnership with a legacy carrier off the table will help us when we go to trial this fall to obtain approval from the court to move forward with our Spirit acquisition,” JetBlue Chief Executive Officer Robin Hayes said in an internal memo seen by Bloomberg.
The Justice Department declined to comment. Savanthi Syth, an analyst at Raymond James, said the news “on the margin improves the probability that the JetBlue-Spirit merger gets approved.”
Shares of JetBlue and American fell less than 1% in extended New York trading at 6:39 p.m. Spirit rose 2.3%.
Hayes said JetBlue, which had ramped up flying in New York and Boston under the alliance, now will likely need fewer workers in both cities. The airline expects to avoid furloughs by reducing hiring, natural attrition and providing workers options elsewhere.
American Airlines still plans to appeal what it called “an erroneous” court decision against the Northeast Alliance. The company said in a statement that it respects JetBlue’s decision and will work with the airline to ensure travel plans of mutual customers aren’t disrupted.
JetBlue declined to speculate on the appeal process, but said “with the termination of the NEA, we are taking it off the table as it relates to the Spirit litigation.”
Gaining Spirit — the largest ultra discount carrier — is the only way it can gain the size and heft to compete with larger carriers that dominate the US market, JetBlue has said. An Oct. 16 trial date has been set in that case.
JetBlue won a hard-fought battle against Frontier Group Holdings Inc. in October, when Spirit shareholders rejected a pending deal with that carrier in favor of the more lucrative rival offer. JetBlue and Spirit have maintained that they still expect to receive required regulatory approvals and close the transaction no later than the first half of 2024.
It will be a tough fight given the anti-consolidation stance taken by President Joe Biden’s administration. They’ll need to convince the Justice Department that the merged airline won’t have enough market concentration in some cities to give it an unfair pricing and competitive advantage. JetBlue in June agreed to sell Spirit’s operations at New York’s LaGuardia Airport to Frontier to help quell antitrust concerns, contingent upon closing of the pending merger.
Mary Schlangenstein, Bloomberg
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