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JetBlue and Spirit Airlines mutually agreed to terminate a proposed $3.8 billion merger. The deal would have created the nation’s fifth largest airline.

The March 4 announcement follows a January ruling by a federal judge in favor of the Justice Department, which filed an antitrust suit to block the merger. Invoking the Clayton Act, the federal government argued the deal would eliminate competition and further consolidate the nation’s airline industry.

While the companies say they believe in the procompetitive benefits of the merger, regulatory hurdles would prevent hitting the July 24, 2024, closing date.

“We believed this merger was worth pursuing because it would have unleashed a national low-fare, high-value competitor to the Big Four airlines,” said JetBlue CEO Joanna Geraghty. “We are proud of the work we did with Spirit to lay out a vision to challenge the status quo, but given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently.”

She added, “We wish the very best going forward to the entire Spirit team.”

“We are disappointed we cannot move forward with a deal that would save hundreds of millions for consumers and create a real challenger to the dominant ‘Big Four’ U.S. airlines,” said Spirit’s president and CEO Ted Christie, wishing the JetBlue team well.

Looking ahead

As a result of the termination, JetBlue will pay Spirit $69 million.

Despite the disappointment of having to scrap the deal, the airlines are confident about their separate futures.

“We remain confident in our future as a successful independent airline. Throughout the transaction process, given the regulatory uncertainty, we have always considered the possibility of continuing to operate as a standalone business and have been evaluating and implementing several initiatives that will enable us to bolster profitability and elevate the guest experience,” said Christie. “As we go forward, I am certain our fantastic Spirit team will continue delivering affordable fares and great experiences to our guests.”

“JetBlue has a strong organic plan and unique competitive advantages, including a beloved brand, a unique value proposition, and high-value geographies,” said Geraghty. “We have already begun to advance our plan to restore profitability. We look forward to sharing more on our progress in the coming months.”

In New Jersey, JetBlue operates out of Newark Liberty International Airport in Terminals A and B while Spirit operates in Terminal B.