JetBlue drop-off area at Latest York’s LaGuardia Airport on Oct. 31, 2023.
Leslie Josephs/CNBC
JetBlue Airways stock tumbled to a virtually 12-year low on Tuesday as the corporate forecast a loss for the fourth quarter and heads to court to defend its acquisition of budget carrier Spirit Airlines, a purchase order it argues is crucial to its future.
Shares were down 15% in early trading Tuesday to roughly $3.55 apiece. Spirit shares were down about 10%, at a greater than three-year low.
The Justice Department sued in March to dam JetBlue’s $3.8 billion all-cash purchase of Spirit, a deal the airline reached with the discounter in 2022 after a bidding war with rival Frontier Airlines.
The deal would create the fifth-largest airline within the U.S. JetBlue argued it needs to purchase Spirit to grow and higher compete against giant carriers — American, Delta, United and Southwest — which control about three-quarters of the U.S. market and are products of megamergers themselves.
The Justice Department, nevertheless, alleges that “the proposed transaction will increase fares and reduce alternative on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely.”
The lawsuit is a test for President Joe Biden’s Justice Department, which has aggressively pursued antitrust cases with mixed ends in the airline, healthcare and publishing industries, amongst others.
The trial starts on Tuesday and is about to last about three weeks in U.S. District Court in Boston.
The merger could be the primary amongst major U.S. airlines since Alaska and Virgin America combined in 2016.
JetBlue and Spirit stocks on the primary day of an antitrust trial in search of to dam their merger.
Neither JetBlue nor Spirit are on solid footing. Fuel prices have climbed together with other costs, just as red-hot post-pandemic growth in travel demand has eased and fares have dropped, depriving carriers of revenue once they need it to cover expenses.
JetBlue on Tuesday posted third-quarter results that got here in below analyst estimates. The airline reported an adjusted loss per share of 39 cents on revenue of $2.35 billion, underperforming an expected loss per share of 25 cents and revenue of $2.38 billion, based on consensus estimates compiled by LSEG, formerly generally known as Refinitiv.
JetBlue also forecast an adjusted loss for the fourth quarter and the complete yr, guiding to an adjusted lack of between 35 cents and 55 cents within the last three months of the yr.
Spirit Airlines, meanwhile, said it is going to have little if any capability growth next yr because it grapples with slower demand and a Pratt & Whitney engine issue.
The budget airline told staff it is going to pause new-hire flight attendant and pilot training next month, CNBC first reported last week.
JetBlue said it will not answer any questions on the acquisition on the earnings call on Tuesday.