JetBlue Airways Corp. and Spirit Airlines Inc. said Monday they have reached an agreement to terminate their July 2022 merger agreement, sending the former’s stock up 6% in early trade.
“Although both companies continue to believe in the procompetitive benefits of the combination, JetBlue
JBLU,
and Spirit
SAVE,
mutually agreed that terminating is the best path forward for both companies as required closing conditions, including receiving necessary legal and regulatory approvals, were unlikely to be met by the merger agreement’s outside date of July 24, 2024,” JetBlue said in a statement.
JetBlue Chief Executive Joanna Geraghty said the pair believed their combination would have created a national, low-fare, high-value competitor to the big four airlines.
But in January, the deal was put in peril when a court sided with the Justice Department in saying that a merger between low-cost JetBlue and ultra-low-cost Spirit would hurt competition. The companies had appealed the ruling.
See also: JetBlue still evaluating options of Spirit merger, stock drops after earnings
JetBlue will now pay Spirit a $69 million breakup fee to release all claims between the two companies.
“JetBlue has a strong organic plan and unique competitive advantages, including a beloved brand, a unique value proposition, and high-value geographies,” Geraghty said in a statement.
The company will focus on its efforts to return to profitability, refocusing on core strengths while cutting costs. The airline is on track to deliver $175 million to $200 million in cost savings from its structural-cost program and $75 million in maintenance savings from its fleet modernization, as well as incremental savings from other fixed-cost base reductions. Those are expected to put it on track to approach breakeven operating margins in 2024.
JetBlue is planning to host an investor day on May 30.
For its part, Spirit said it had always considered the possibility it would have to go it alone and has been evaluating its next steps.
“The company has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations, including assessing options to refinance upcoming debt maturities,” it said in a separate statement.
Spirit’s stock fell 12% early Monday and is down 64% in the last 12 months, while the S&P 500
SPX
has gained 27%.
This story originally appeared on Marketwatch
