It was a surprising turn of events today for airline stock JetBlue (NASDAQ:JBLU), which gained over 6% in Tuesday afternoon’s trading after a federal judge blocked the merger between itself and Spirit Airlines (NYSE:SAVE). The move wasn’t so good for Spirit, however, which saw shares nosedive around 50% at the same time.
Once the Justice Department launched a lawsuit against the duo, citing the notion that fares would likely go up as a result, that was enough for U.S. District Court Judge William Young to hand down a ruling that halted any move to make a merger happen. Young essentially cited the Justice Department’s case in every sense, noting that such a move would see JetBlue convert Spirit planes to the JetBlue layout and then see fares increase. Spirit and JetBlue, meanwhile, objected to the idea, saying that their new status as the fifth-largest airline would allow them to better grow and compete against established airlines.
It’s Not Just Competition, Either
It wasn’t just competition that prompted the judge’s ruling. The sheer amount of debt that JetBlue would incur as a result was also a concern, though having the fifth-largest airline on hand might well improve its ability to handle and process debt. This isn’t the first time that Spirit has found itself on the bad end of a merger, either; it recently tried to stage a merger with Frontier Airlines, a move that even Spirit’s own shareholders couldn’t get behind.
Is JetBlue or Spirit Airlines the Better Buy?
Turning to Wall Street, SAVE stock took it on the chin today, but this Hold-rated stock boasts a 61.82% upside potential on its average price target of $12.25. Meanwhile, JBLU stock, which gained significantly today, is considered a Moderate Sell with an average price target of $4.33, which means a 16.73% downside risk.
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