JetBlue and Spirit Airlines cancel $3.8 billion merger

American low-cost airlines JetBlue Airways Corp. and Spirit Airlines Inc. announced this week that they will no longer challenge the court ruling that blocked their planned $3.8 billion merger, according to The New York Times. The decision, given in January, blocked the agreement between the parties for antitrust reasons.

Immediately after the decision at the beginning of the year, JetBlue and Spirit announced that they will continue to fight against it, respectively to complete the merger. At that time, the two air carriers claimed that the merger would lead to a reduction in fares for passengers, and the company resulting from the transaction, under the JetBlue brand, would be able to compete on an equal footing with the four major American air carriers.

Now, however, the two companies announce that renouncing the merger agreement is "the best way forward", the legal obstacles being a challenge. While they continue to believe in the competitive benefits of the merger, the companies say they are unlikely to get the necessary legal and regulatory approvals by July 24, as stipulated in the deal.

• Morgan Stanley: The global volume of mergers and acquisitions will increase by 50% in 2024

Global M&A volume is set to rise 50% this year compared to 2023 as concerns about funding costs, inflation and recession ease, Morgan Stanley analysts say in a report cited by Reuters.

"We believe that this "winter" regarding mergers and acquisitions is beginning to thaw, and the activity should return to cyclical and secular levels", say the analysts of the American bank.

Morgan Stanley expects Europe and North America to be the regions that will benefit the most from the resumption of mergers and acquisitions activities, but the outlook for India, Australia, South Korea, Japan and the ASEAN countries also looks favorable.

Aggressive interest rate hikes adopted by the main central banks, high inflation and concerns about a recession have affected mergers and acquisitions activity in 2023, notes Agerpres. Global M&A volume fell 35% last year to the lowest level since 2004 on an inflation-adjusted basis, while as a percentage of US GDP, M&A last year's acquisitions reached the lowest level in the last three decades, according to Morgan Stanley analysts.

Expectations regarding a reduction in borrowing costs at the end of this year, a sustained decrease in consumer prices, hopes for a "soft landing" of the world's major economies, as well as increased confidence among companies could be the basis for relaunching the merger and purchases.

Also, the demand for capabilities in the fields of artificial intelligence and the cloud, the transition to clean energy and innovations in the so-called life sciences will be additional factors that will stimulate mergers and acquisitions, analysts from Morgan Stanley add.

The American bank believes that the health, real estate and technology sectors will be the main beneficiaries of mergers and acquisitions.

When it comes to financing mergers and acquisitions, cash and debt seem more attractive than equity, despite rising bond yields, Morgan Stanley analysts say.