JetBlue drop-off area at New York’s LaGuardia Airport on Oct. 31, 2023.
JetBlue Airways stock tumbled to a nearly 12-year low on Tuesday as the company forecast a loss for the fourth quarter and heads to court to defend its acquisition of budget carrier Spirit Airlines, a purchase 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 more than three-year low.
The Justice Department sued in March to block 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 in the U.S. JetBlue argued it needs to buy Spirit to grow and better 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, however, alleges that “the proposed transaction will increase fares and reduce choice 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 results in the airline, healthcare and publishing industries, among others.
The trial starts on Tuesday and is set to last about three weeks in U.S. District Court in Boston.
The merger would be the first among major U.S. airlines since Alaska and Virgin America combined in 2016.
JetBlue and Spirit stocks on the first day of an antitrust trial seeking to block their merger.
Neither JetBlue nor Spirit are on solid footing. Fuel prices have climbed along with other costs, just as red-hot post-pandemic growth in travel demand has eased and fares have dropped, depriving carriers of revenue when they need it to cover expenses.
JetBlue on Tuesday posted third-quarter results that came 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, according to consensus estimates compiled by LSEG, formerly known as Refinitiv.
JetBlue also forecast an adjusted loss for the fourth quarter and the full year, guiding to an adjusted loss of between 35 cents and 55 cents in the last three months of the year.
Spirit Airlines, meanwhile, said it will have little if any capacity growth next year as it grapples with slower demand and a Pratt & Whitney engine issue.
The budget airline told staff it will pause new-hire flight attendant and pilot training next month, CNBC first reported last week.
JetBlue said it would not answer any questions about the acquisition on the earnings call on Tuesday.