JetBlue and Spirit Airlines to Appeal Merger Block Amid Spirit’s Financial Challenges

JetBlue Airways and Spirit Airlines are set to continue their legal fight to salvage their planned merger, despite a federal judge’s ruling against the USD 3.8 billion acquisition. On January 19, the airlines announced their intention to appeal the decision to the US Court of Appeals for the First Circuit. This move follows the judge’s decision, which stated that the merger would violate antitrust laws and potentially harm price-conscious consumers who depend on Spirit’s low-cost model.

The appeal, filed jointly by JetBlue and Spirit, aligns with the merger agreement’s stipulations. However, the process could extend over several months, with JetBlue’s deadline to finalize the merger set for July. The two airlines could potentially agree to prolong this timeframe.

Simultaneously, Spirit Airlines is facing significant operational and financial difficulties. A notable issue is the grounding of a substantial portion of its fleet due to engine availability problems with Pratt & Whitney geared turbofan (GTF) engines. Currently, thirteen of its eighty-four Airbus A320-200Ns are inactive, as per ch-aviation fleets data. Spirit, with a total fleet of 203 Airbus narrowbodies, also anticipates the delivery of forty-one more A320-200Ns.

In an investor update, Spirit revealed ongoing negotiations with the engine manufacturer for compensation related to these operational challenges. While no agreement has been finalized, Spirit anticipates significant liquidity from the eventual compensation over the next few years.

Spirit is also grappling with escalating operating costs and supply chain issues. The airline is exploring options to refinance its 2025 debt maturities, including a principal amount of USD 1.1 billion in 8% senior secured notes. In an effort to bolster its financial position, Spirit has taken steps such as extending the maturity of a revolving credit facility and completing sale-leaseback transactions for 25 aircraft, leading to the repayment of approximately USD 465 million of debt on these aircraft.

Despite these challenges, Spirit has clarified in a statement to Bloomberg that it is not considering or involved in any statutory restructuring. The outcome of the appeal and the airline’s financial maneuvers will be crucial for the future of both Spirit Airlines and the proposed merger with JetBlue, a move that has been closely watched in the aviation industry.