Summary
- A court decision blocking JetBlue’s acquisition of Spirit Airlines will likely lead to severe financial pain for each airlines.
- JetBlue CEO Robin Hayes is rallying employees and considering an appeal, however the market needs greater than a tweet to regain confidence.
- Analysts predict that Spirit Airlines may file for bankruptcy and potentially liquidate, because the ruling raises doubts about its survival and skill to restructure.
Because the dust starts to choose Tuesday’s court decision to dam JetBlue Airways’ planned acquisition of Spirit Airlines, most respectable outlets foreshadow that severe financial pain lies ahead for each airlines.
Profitability could also be easier said than done
In a move designed to get a message out to his employees as fast as possible, JetBlue CEO Robin Hayes posted this on X on Wednesday:
For all those not inclined to open the tweet and skim the complete letter, the message from Hayes is that now could be the time to review the choice and consider with Spirit whether the airlines wish to appeal the choice. Additionally it is a rallying call to the troops, with Hayes saying:
“A technique or one other, be assured: JetBlue has a shiny future. If we want to maneuver without Spirit, we are going to invigorate our standalone organic plan, continuing to fight for more market share and win customers from the massive airlines – just as we have now done for nearly 24 years.”
Hayes also says it’s time to restore the airline to profitability, and the airline needs everyone’s support to get back to profitability and While his words are relatively upbeat and inspiring, today’s coverage suggests the market will need quite a bit greater than a tweet to purchase into JetBlue or Spirit and push share prices back to their previous levels.
Photo: Lukas Souza | Easy Flying
The fact is that incoming CEO Jonna Geraghty is in for a brutal initiation when she takes over, and returning the airline to profitability is an enormous task before even getting her feet under the CEO’s desk. In keeping with yesterday, some investors and analysts had expressed concerns prior to now that Spirits’ troubles could hurt JetBlue after the merger, suggesting JetBlue renegotiate the deal attributable to the autumn in Spirits’ share price even before Tuesday’s court ruling.
Tough times ahead for JetBlue and Spirit
Reuters also said that this decision to dam the deal is an element of a broader push by the Biden administration to step up antitrust enforcement aggressively. To back that up, it cites JetBlue’s earlier court skirmish around its Northeast partnership with American Airlines, with that judge finding it violated antitrust law., although American Airlines is appealing that call.
Today, Reuters said JetBlue’s share price closed 5% higher on Tuesday but was down 6.2% in morning trade on Wednesday. Spirit Airlines has suffered more, with its shares falling 47% after the choice was handed down on Tuesday after which losing one other 22% on Wednesday.
Photo: EQRoy | Shutterstock
Analysts are already saying that a possible scenario is for Spirit to file for Chapter 11, and a liquidation would follow that. In keeping with , Helane Becker, an airline analyst at TD Cowen, said in a note:
“We recognize this sounds alarmist and harsh, but the truth is we consider there are limited scenarios that enable Spirit to restructure.”
While the ruling has just about killed off the merger, it has also called into query whether Spirit can survive, particularly given it has not turned a profit since 2019. The specter of bankruptcy could push the airline to slash its fares much more, with Becker noting,
Do you’re thinking that Spirit and JetBlue will survive? Tell us within the comments.