Department of Justice Slams the Brakes on JetBlue and Spirit Airlines Merger

Spirit Airlines stock took a nosedive as news emerged that regulators may block the prospective merger between JetBlue Airways and Spirit Airlines.

The Department of Transportation and Department of Justice are looking to halt the deal on anti-competitive grounds. This news sent shares of Spirit Airlines sliding.

The Reason Why

The news follows a meeting between executives from both carriers and the DOJ in late February, where they tried to assuage regulatory concerns on the planned merger. Reports earlier in February suggested that the department was planning to file a suit against the merger as early as this month. However, these efforts to change the DOJ's stance on the deal have been unsuccessful, as a suit is indeed due to be filed as soon as Tuesday.

The Department of Transportation plans to launch a parallel proceeding to block the transfer of Spirit's airline certificate, as it is considered incompatible with the public interest. This is a power that the agency hasn't used since the deregulation of the industry under the Carter administration.

The Industry

The news had a mixed effect on the market, as shares of JetBlue Airways rose 2.22% in afternoon trading, while Spirit Airlines stock slumped over 9% before rebounding modestly. With the future of the merger in doubt, investors in both companies will be watching closely to see how this situation develops.

It remains to be seen how this regulatory action will impact the future of Spirit Airlines, but it is clear that the market is responding with caution