JetBlue Airways said on Friday that it might back out of a $3.8 billion acquisition of Spirit Airlines after a federal judge blocked the deal.
The announcement came just a week after JetBlue and Spirit had said they would appeal the decision, which was made in an antitrust case brought by the Justice Department.
In a regulatory filing on Friday, JetBlue said the deal could be terminated after Sunday if certain conditions weren’t met. Spirit said in its own filing that it disagreed with JetBlue and believed “there is no basis for terminating” the deal.
A federal judge in Boston blocked the proposed merger on Jan. 16, ruling that Spirit plays an important role in keeping airline fares low and that a takeover by JetBlue would hurt travelers. The ruling was a win for the Justice Department, which under President Biden has sought to limit corporate consolidation across the economy.
The agreement has an expiration date of Jan. 28, and if certain conditions are met that date is automatically extended to July 24. JetBlue appears to be arguing that Spirit has not met its end of the bargain, allowing JetBlue to walk away from the deal on or after Sunday.
As part of the merger agreement, JetBlue agreed to pay Spirit and its shareholders a combined $470 million if regulators blocked the deal.
Some legal experts said JetBlue’s filing on Friday suggested that the company might ultimately seek to dispute the $470 million breakup fee. That fee was instrumental in getting Spirit to agree to JetBlue’s offer and walk away from a proposed deal with Frontier Airlines.
“Basically, JetBlue gambled,” said Dylan Carson, a former antitrust lawyer at the Justice Department who is now at the law firm Manatt, Phelps & Phillips.
Spirit is sure to contest in court any effort by JetBlue to avoid paying the breakup fee.
Some antitrust lawyers said JetBlue appeared to have determined that an appeal of the federal judge’s ruling would be costly and time-consuming and might well fail.
“It certainly seems like at this point at least this antitrust division is done letting airline mergers go through unchallenged,” said Dan McCuaig, a former antitrust trial lawyer at the Justice Department who is now a partner at the law firm Cohen Milstein.
Spirit’s share price tumbled about 10 percent on Friday afternoon. Its stock has lost more than half its value since the deal was blocked because investors are worried about its prospects as a stand-alone business. Spirit is not profitable and is carrying a lot of debt. The airline has also been forced to ground some of its jets because of an engine problem.
The share price of JetBlue, which could save billions of dollars by not pursuing an appeal and going through with the deal, was up about 3 percent Friday afternoon.
Jonnathan Handshoe, an airline analyst for CFRA Research, noted that the merger is in jeopardy at a tumultuous time for the industry. Even as customers have spent more on travel over the past year, the price of fuel and labor have gone up and regulators are scrutinizing Boeing and limiting the plane manufacturer’s ability to expand production after a panel blew off a 737 Max 9 jet during an Alaska Airlines flight this month.
“Given the filing today, we think JetBlue is going to focus on its own future,” Mr. Handshoe said.
