It has been a complicated month for the air travel industry so far. Most recently, this week, JetBlue’s (NASDAQ:JBLU) long-awaited $3.8 billion acquisition of Spirit Airlines (NYSE:SAVE) has encountered an obstacle that could spell the end. Specifically, U.S. District Court Judge William Young ruled against the deal, sending SAVE stock plunging within just a few hours. This makes for a highly questionable future for a company that already didn’t have much to offer investors. JetBlue had thrown Spirit a lifeline by attempting to buy the firm. If the deal is truly dead, though, it could be the beginning of the end for Spirit.
Does this mean that investors should be ditching SAVE stock now before shares sink even further? Let’s take a closer look.
Is SAVE Stock Grounded or Just Down?
News of the deal being blocked hasn’t impacted JBLU stock, which is actually rising today. Meanwhile, Spirit is moving in the opposite direction. As of this writing, SAVE stock is down more than 45% for the day. The discount airline stock has battled extreme turbulence for the past six months, but nothing has come close to shedding nearly 50% of its value in just one session.
Why is the deal not moving forward? This appears to be the result of efforts made by the U.S. Department of Justice to stop the acquisition from going through due to antitrust concerns. News of this development sent SAVE stock down last month as concerns for the acquisition abounded. Now these fears have been realized as a judge takes the case a step further. U.S. District Court Judge William Young issued the following statement:
“If JetBlue were permitted to gobble up Spirit — at least as proposed — it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline […] Worse yet, the merger would likely incentivize JetBlue further to abandon its roots as a maverick, low-cost carrier.”
That said, JetBlue and Spirit have contested the decision, claiming that their merger is necessary for the industry. In a joint statement, the airlines stated that they would be “reviewing the court’s decision and are evaluating our next steps as part of the legal process.” Until the deal moves forward, though, SAVE stock will likely stay on the ground as it faces an uncertain future. And if JetBlue can’t extend a lifeline to the company, no one will likely be able to rescue Spirit.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
