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JetBlue, considering, says it may back out of the deal to acquire Spirit Airlines.

JetBlue Airways is considering pulling out of its $3.8 billion acquisition of Spirit Airlines following a federal judge’s blockage of the deal in response to an antitrust case initiated by the Justice Department. This potential reversal comes shortly after both companies announced their intention to appeal the judge’s decision.

In a regulatory filing, JetBlue indicated that the acquisition might be terminated if specific conditions weren’t met by Sunday. In response, Spirit Airlines countered JetBlue’s position, asserting that there was no valid reason to end the deal.

The federal judge’s decision in Boston, blocking the merger on January 16, underscored Spirit’s vital role in maintaining affordable airline fares. The judge argued that JetBlue’s takeover could adversely affect travelers, aligning with the Justice Department’s current efforts, under President Biden, to curb corporate consolidation across industries.

Both companies confirmed plans to appeal last week. As part of the initial merger agreement, JetBlue committed to paying Spirit and its shareholders a combined $470 million if regulatory obstacles surfaced.

Following the blocked deal, Spirit Airlines’ stock experienced a substantial decline of around 16% on Friday morning, with its overall value plummeting by more than half since the judge’s decision. Investors are expressing concerns about Spirit’s financial stability, compounded by profitability challenges and apprehensions about mounting debt. Additionally, Spirit had to ground some jets due to engine problems.

In contrast, JetBlue’s stock saw a slight increase on Friday morning. Should JetBlue decide against pursuing an appeal and opt to proceed with the deal, the airline could potentially save billions of dollars. The situation remains fluid as the companies navigate the complexities of the antitrust ruling and weigh their options moving forward.

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