Why Spirit Airlines Stock Is Falling Today
Executives at JetBlue Airways (NASDAQ: JBLU) and Spirit Airlines (NYSE: SAVE) expect the Department of Justice (DOJ) to move to block their proposed merger. That news sent shares of Spirit into a tailspin. As of 2:15 p.m. ET Monday, with the broader market indexes up fractionally, Spirit shares were down by 6.3%.
Last summer, JetBlue and Spirit agreed to combine in a cash-and-stock deal that valued Spirit at about $7.6 billion, including debt. JetBlue outbid Frontier Holdings Group for the prize, but from the start, there have been some concerns that the two airlines' overlapping route networks and dissimilar business models would lead regulators to oppose the merger.
Spirit, like Frontier, is an ultra-low-cost airline that has the ability to drive down ticket prices throughout the industry. Spirit and Frontier had argued that their proposed merger would be pro-competition because it would have created a budget carrier with more scale. By contrast, Frontier warned that if JetBlue bought Spirit, the impact would be to take a significant low-cost player out of the picture.
Source Fool.com
