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Spirit Airlines (NYSE:SAVE) dropped 13%, falling for the fourth day in a row, after the Justice Department’s trial to block the discount airlines $3.8 billion sale to JetBlue (NASDAQ:JBLU) started in Boston before a federal judge. JetBlue fell 12% after reporting Q3 results.
Tuesday’s plunge in Spirit Airlines (SAVE) follows an 11% drop on Monday at least partly as some investors were looking for a settlement with DOJ before the start of the 3-4 week trial after the airlines recently made concessions to try to appease the antitrust regulator.
The trial had been delayed a few times in recent weeks, leaving some investors thinking that there may be some a settlement with the antitrust regulator in the works.
“The loss of Spirit would result in roughly a billion dollars of net harm, year after year, for millions of passengers who fly over 100 routes throughout the country,” DOJ attorney Arianna Markel said on Tuesday, according to a Bloomberg account of the trial. . “Higher fares will mean that some people won’t be able to afford to fly at all.”
JetBlue’s internal documents “will show that a bigger JetBlue means fewer planes, fewer seats and higher fares,” Markel said.
Traders are concerned that if the deal is DOJ blocks the deal in court, the downside for SAVE could be enormous, with the sharses potentially falling to $5, especially after the recent Spirt Airlines (SAVE) results and guidance.
JetBlue (JBLU) also on Tuesday reported its Q3 results and updated its full year 2023 outlook to reflect near-term headwinds. The low-cost airline now expects a full year revenue growth of 3%-5%, down from 6%-9% previously, and adjusted losses of ($0.65) – ($0.45), compared to $0.05 – $0.40 income previously and -$0.24 consensus.
The JetBlue (JBLU) results and outlook comes after Spirit (SAVE) on Thursday reported Q3 results and forecast 4Q revenue below analysts’ estimates.
The DOJ sued to block the combination in March. JetBlue (JBLU) is trying to appease the DOJ with a divestiture plan announced last month, though a recent report indicated that the DOJ still plans to move forward with its trial to halt the deal.
Spirit (SAVE) shares jumped 12% on Sept. 11 when JetBlue (JBLU) announced its plans to try to appease the DOJ with its divestures. The shares have since plummeted 35%.
JetBlue (JBLU) last month said it will transfer all Spirit (SAVE) holdings at Boston and Newark airports to Allegiant Travel Company (ALGT) as well as five gates and ground facilities at Fort Lauderdale’s airport. In June, JetBlue announced that it would divest all of SAVE’s holdings at New York’s LaGuardia Airport to Frontier (ULCC).
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Image and article originally from seekingalpha.com. Read the original article here.