JetBlue Airways announced Monday it is pulling out of its deal to purchase Spirit Airlines.

The decision comes in the wake of a federal court ruling blocking the deal from taking place on antitrust grounds. The Justice Department had argued that airfares could go up if Spirit was no longer an independent airline.

Spirit has been a leader in the segment of the airline industry that offers very low, no-frills base fares that required passengers to pay extra for everything, including carry-on baggage.
JetBlue agreed to pay Spirit $69 million as part of its decision to end the deal, JetBlue said.

While the companies had appealed the judge’s ruling blocking the deal, JetBlue and Spirit both issued statements saying it had become clear they wouldn’t be able to overcome the legal obstacles to complete the merger.

“Given the hurdles to closing that remain, we decided together that both airlines’ interests are better served by moving forward independently,” said JetBlue CEO Joanna Geraghty.

Spirit said it was always prepared to continue as an independent airline, given the regulatory challenges the deal faced.

“We are disappointed we cannot move forward with a deal,” Spirit CEO Ted Christie said. “However, we remain confident in our future as a successful independent airline.”

The decision could spark a new bidding war for Spirit. There is even the possibility that it could lead to a bankruptcy filing and liquidation for Spirit, according to at least one airline analyst. Spirit has struggled with losses for several years as larger airlines have returned to profitability since demand for flying resumed after the height of the pandemic.

JetBlue had signaled it might pull out of the deal in a January filing with the Securities and Exchange Commission, shortly after the judge’s decision. It has been clear for months that Spirit is no long worth the $3.8 billion, or $33.50 a share, that JetBlue agreed to pay for the airline.