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Is JetBlue (JBLU)-Spirit (SAVE) Deal in Jeopardy Post Lawsuit?
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The Department of Justice has sued to block the impending takeover of Spirit Airlines (SAVE - Free Report) by JetBlue Airways (JBLU - Free Report) . The lawsuit has been filed on concerns that the merger, on taking effect, will be anti-competitive.
The lawsuit alleges that the $3.8-billion deal, on materialization, will lead to higher fares and reduced number of seats, resulting in an unfavorable scenario for passengers travelling on the flights. JetBlue had plans to remove 10-15% of seats from every Spirit plane, per the complaint. Per U.S. senator, Elizabeth Warren, "Americans want more choices and lower prices for airline tickets, not another giant merger."
The roadblock pertaining to the impending merger comes at a time when the U.S. airlines are struggling from high labor and fuel costs. A merger is looked at as a way aimed at saving costs. Making matters worse as far as the future of the deal is concerned, the U.S. Department of Transportation (USDOT) is supporting the lawsuit filed by the Department of Justice.
We remind investors that both JetBlue and Spirit filed a transfer application with the USDOT asking for permission to combine and operate their international routes under one certificate. SAVE and JBLU had also filed an exemption application requesting the USDOT to permit them to operate under common ownership before the requested transfer. The USDOT is likely to block the transfer of SAVE’s airline certificate.
However, JBLU’s management put forward the argument that the takeover of Spirit Airlines would result in a market share of 9% for the former and allow it to better compete with the leading U.S. airlines like American Airlines (AAL - Free Report) and United Airlines (UAL - Free Report) . Given this back drop, it will be interesting to wait and see the future course of action regarding the deal.
Zacks Rank & Key Picks
Currently, both Spirit Airlines and JetBlue carry a Zacks Rank #3 (Hold). Investors interested in the Zacks Airline industry may consider stocks like American Airlines and United Airlines, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Airlines is based in Fort Worth, TX. The gradual increase in air-travel demand (particularly for leisure) is aiding AAL. However, high fuel costs are hurting the bottom line.
Over the past 60 days, the AAL stock has seen the Zacks Consensus Estimate for 2023 earnings being revised 24.3% upward. American Airlines surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters (missing once), the average beat being 7.79%.
United Airlines is based in Chicago. The gradual increase in air-travel demand (particularly for leisure) is aiding UAL as well. However, high fuel costs are affecting its bottom line.
Over the past 60 days, the UAL stock has seen the Zacks Consensus Estimate for 2023 earnings being revised 22.1% upward. United Airlines surpassed the Zacks Consensus Estimate for earnings in two of the last four quarters (missing twice), the average beat being 5.42%.
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Is JetBlue (JBLU)-Spirit (SAVE) Deal in Jeopardy Post Lawsuit?
The Department of Justice has sued to block the impending takeover of Spirit Airlines (SAVE - Free Report) by JetBlue Airways (JBLU - Free Report) . The lawsuit has been filed on concerns that the merger, on taking effect, will be anti-competitive.
The lawsuit alleges that the $3.8-billion deal, on materialization, will lead to higher fares and reduced number of seats, resulting in an unfavorable scenario for passengers travelling on the flights. JetBlue had plans to remove 10-15% of seats from every Spirit plane, per the complaint. Per U.S. senator, Elizabeth Warren, "Americans want more choices and lower prices for airline tickets, not another giant merger."
The roadblock pertaining to the impending merger comes at a time when the U.S. airlines are struggling from high labor and fuel costs. A merger is looked at as a way aimed at saving costs. Making matters worse as far as the future of the deal is concerned, the U.S. Department of Transportation (USDOT) is supporting the lawsuit filed by the Department of Justice.
We remind investors that both JetBlue and Spirit filed a transfer application with the USDOT asking for permission to combine and operate their international routes under one certificate. SAVE and JBLU had also filed an exemption application requesting the USDOT to permit them to operate under common ownership before the requested transfer. The USDOT is likely to block the transfer of SAVE’s airline certificate.
However, JBLU’s management put forward the argument that the takeover of Spirit Airlines would result in a market share of 9% for the former and allow it to better compete with the leading U.S. airlines like American Airlines (AAL - Free Report) and United Airlines (UAL - Free Report) . Given this back drop, it will be interesting to wait and see the future course of action regarding the deal.
Zacks Rank & Key Picks
Currently, both Spirit Airlines and JetBlue carry a Zacks Rank #3 (Hold). Investors interested in the Zacks Airline industry may consider stocks like American Airlines and United Airlines, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Airlines is based in Fort Worth, TX. The gradual increase in air-travel demand (particularly for leisure) is aiding AAL. However, high fuel costs are hurting the bottom line.
Over the past 60 days, the AAL stock has seen the Zacks Consensus Estimate for 2023 earnings being revised 24.3% upward. American Airlines surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters (missing once), the average beat being 7.79%.
United Airlines is based in Chicago. The gradual increase in air-travel demand (particularly for leisure) is aiding UAL as well. However, high fuel costs are affecting its bottom line.
Over the past 60 days, the UAL stock has seen the Zacks Consensus Estimate for 2023 earnings being revised 22.1% upward. United Airlines surpassed the Zacks Consensus Estimate for earnings in two of the last four quarters (missing twice), the average beat being 5.42%.