Spirit Airlines experienced a notable decline in its share value following a court ruling that halted its proposed $3.8 billion merger with JetBlue. The decision, which came amid concerns about the merger’s potential anticompetitive effects, has raised concerns about Spirit’s financial stability, including the possibility of bankruptcy.
On January 16, Spirit’s shares closed at $7.92, but saw a decrease to approximately $6.75 in pre-market trading the following morning, bringing its market capitalization to just over $700 million. This is a sharp contrast from its previous trading value of over $16 per share prior to the ruling.
This situation follows JetBlue’s announcement in October 2022 of its intention to purchase Spirit for $33.50 per share, a deal that emerged after a failed merger attempt between Spirit and Frontier Airlines (NYSE:FTR). The 113-page ruling by Judge William Young highlighted concerns that the merger would lead to “anticompetitive harm.”
Spirit Airlines' Fee Strategy and Cultural Commentary
Spirit Airlines, known for its low-cost fares complemented by additional fees for services typically included by other airlines, such as carry-on bags and water, has been a topic of humor in popular culture, with former Daily Show host Trevor Noah and other comedians making light of these charges. In contrast, JetBlue, while not as frequently targeted for humor, has adopted some of Spirit’s fee strategies.
Industry analysts have expressed pessimism about Spirit’s prospects, noting a potential bankruptcy filing. They point to increased capacity by other airlines in late 2023 and a decline in Spirit’s business since the announcement of the merger with JetBlue.