(Bloomberg) -- JetBlue Airways Corp. is ending its fight to overturn a federal judge’s ruling that declared its regional alliance with American Airlines Group Inc. violated US antitrust law, focusing instead on a similar challenge to its pending merger with Spirit Airlines Inc.
The carrier announced its decision to drop its opposition — and the partnership with American — in a statement Wednesday, three weeks before US District Judge Leo Sorokin is set to announce his final order in the so-callled Northeast Alliance case and enter a permanent injunction.
“JetBlue has made the difficult decision not to appeal the court’s determination that the NEA cannot continue as currently crafted, and has instead initiated the termination of the NEA,” JetBlue said in the statement. The carrier said it would start a process of winding down the alliance with American “over the coming months.”
But American Airlines reaffirmed its earlier plan to appeal the judge’s ruling. It said in its own statement that it respects JetBlue’s decision and will work with the airline to ensure travel plans of mutual customers aren’t disrupted.
“JetBlue’s decision and reasoning confirm our belief that the NEA has been highly pro-competitive and that an erroneous judicial decision disregarding the NEA’s consumer benefits has led to an anticompetitive outcome,” it said.
JetBlue had no immediate comment on American’s plans to continue to fight for the alliance between the two carriers.
While JetBlue and American Air had sought to save portions of the arrangement, US antitrust enforcers have asked Sorokin to totally dismantle it and block any effort to craft a new “NEA Lite,” according to court documents.
Shares of JetBlue fell 0.6% in postmarket trading as of 5:22 p.m. in New York, while American declined 0.4%. Spirit rose 2.4%.
JetBlue said it plans to focus on saving its $3.8 billion combination with Spirit, which has also been challenged for allegedly violating antitrust statutes. Gaining Spirit — the largest ultra discount carrier — is the only way it can gain the size and heft to compete with larger carriers that dominate the US market, JetBlue has said. An Oct. 16 trial date has been set in that case.
The carrier’s chief executive officer told employees that dropping its appeal to save the NEA should bolster its case for the planned Spirit merger.
“We hope taking the U.S. Department of Justice’s misplaced concerns about our partnership with a legacy carrier off the table will help us when we go to trial this fall to obtain approval from the court to move forward with our Spirit acquisition,” CEO Robin Hayes said in an internal memo seen by Bloomberg.
Hayes said JetBlue, which had ramped up flying in New York and Boston under the alliance, now will likely need fewer workers in both cities, but that the airline will avoid furloughs by reducing hiring, natural attrition and providing workers options elsewhere.
JetBlue won a hard-fought battle against Frontier Group Holdings Inc. in October, when Spirit shareholders rejected a pending deal with that carrier in favor of the more lucrative rival offer. JetBlue and Spirit have maintained that they still expect to receive required regulatory approvals and close the transaction no later than the first half of 2024.
Defeating the federal challenge to that merger is a far bigger hurdle given the anti-consolidation stance taken by President Joe Biden’s administration. They’ll need to convince the Justice Department that the merged airline won’t have enough market concentration in some cities to give it an unfair pricing and competitive advantage. JetBlue in June agreed to sell Spirit’s operations at New York’s LaGuardia Airport to Frontier to help quell antitrust concerns, contingent upon closing of the pending merger.
Read more: JetBlue to Sell Spirit’s LaGuardia Assets to Rival Frontier
(Updates with American Airlines comments from fourth paragraph, adds Hayes memo from 10th paragraph.)
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