A federal judge has grounded the JetBlue-Spirit merger

A federal judge pulled a Dikembe Mutombo and blocked JetBlue’s $3.8 billion deal to acquire Spirit Airlines yesterday, marking a victory for the Justice Department which previously sued to stop the merger.

• JetBlue shares rose more than 10% on the news, before later giving back half of those gains, while Spirit’s stock nosedived more than 50% and remained around that level.

The ruling: The judge agreed with the DOJ’s argument that JetBlue’s acquisition of Spirit would harm consumers by removing an ultra-low-cost airline that puts pressure on competitors to keep down fares. The DOJ cited statistics that show average ticket prices in a given area decrease by 20% across all airlines when Spirit starts offering flights there (though that figure doesn't include $100 checked bags or $5 waters).

• The airlines say they disagree with the court’s ruling, framing the merger as necessary to create a viable competitor to the four largest carriers that dominate US air travel (American, Delta, United, and Southwest).
• JetBlue and Spirit are currently considering their next steps, which could include a legal appeal.

It hasn’t been a banner year for the US airline industry so far. Delta, the largest US airline, last week lowered its 2024 earnings projection due to supply chain issues and economic uncertainty, causing stock prices across the entire industry to fall 4%-11%.