✈️ This Airline Is Ready to Take Off!

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This Airline Is Ready to Take Off!

Jody Chudley, Contributing Analyst, The Oxford Club

Jody Chudley

In July 2022, JetBlue Airways (Nasdaq: JBLU) announced that it was acquiring Spirit Airlines (NYSE: SAVE).

The agreed-upon purchase price was $33.50 per share in cash.

JetBlue expected the closing of the acquisition to occur in early 2024.

However, in a not completely unexpected turn of events, the Department of Justice filed an antitrust suit to block the deal in March 2023.

The DOJ's complaint alleged that the combination of the two airlines would eliminate competition, raise prices and harm consumers.

With the matter still unresolved nine months later, the stock market has lost interest in this transaction.

Spirit's share price currently hovers near $14... less than half of the all-cash $33.50 buyout price.

If this deal goes through, investors who bought shares at current prices are going to make out very well in a hurry.

The trial to decide the outcome of the deal concluded earlier this week, having started on October 31 in the U.S. District Court in Boston.

I don't know what the judge will decide...

But what I do know is that there is a strong case to be made that this deal should go through. This merger wouldn't be bad for competition; in fact, it would be good for competition.

The combination of Spirit and JetBlue would create the fifth-largest airline in the country. The resulting company would be capable of competing with the four major airlines (Delta, Southwest, American and United), which currently control 80% of the market.

Shouldn't we want a low-cost option that is big enough to compete with the largest airlines? Wouldn't that be good for us as consumers?

Of course it would!

My take is that the odds of the transaction getting approved are at least 50-50.

Plus, there is a very good chance that JetBlue could reach a deal with the DOJ that would allow the transaction to go through.

This could include some kind of concession to ease the DOJ's antitrust concerns, like JetBlue selling off some prime gates at key airports.

Again, if the deal goes through, we are talking about more than a doubling of Spirit's share price in very short order.

But, you may be wondering, what if the deal doesn't get approved? Would Spirit Airlines' stock still be cleared for takeoff?

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