JetBlue and Spirit Airlines filed a notice of appeal after losing an anti-trust trial over JetBlue’s acquisition of the ultra low cost carrier.

When JetBlue lost, their stock soared. This is a bad deal for JetBlue shareholders, with the airline overpaying ($3.8 billion) for access to planes and pilots, and taking on the distractions, costs, and capital expenses of a merger and retrofit of Spirit Airlines aircraft. The federal government was doing them a favor by suing to block the deal.

JetBlue was the worst-performing U.S. airline for on-time performance in 2023 and needs to sort out its own operation before shifting to integrate another airline.

To be sure, in order to win the deal with Spirit over Frontier, JetBlue had to promise that they’d pay a $470 million breakup fee even if the deal doesn’t close due to anti-trust, but about $115 million of that has already been paid – JetBlue pays shareholders 10 cents per share every single month (around $11 million) past January 2023 that the deal doesn’t close, and only the first $1.15 per share counts against the breakup fee.

Continuing to pursue the acquisition continues to cost that $11 million per month, on top of legal fees and distractions. And ultimately JetBlue which has been cutting unprofitable routes rather than expanding doesn’t have a clear direction in which to grow profitable – with or without Spirit.

JetBlue has a reasonable case on appeal. The judge’s order, while thoughtful, effectively endorses a theory that would disallow any acquisition of a low cost rival even when the players are small. Combined the two carriers still don’t break into the top four in the U.S. aviation market. It is also a bit of an odd take for the Department of Justice that consumers are harmed by JetBlue’s plan to give customers flying ex-Spirit Airlines planes more legroom (by removing seats).

However from a strategic standpoint JetBlue is better off rejoining the American Airlines appeal that overturned their alliance with the Dallas-based carrier. And in any event the judge in that case painted a path forward of a partnership there along the lines of American’s deal with Alaska Airlines on the West Coast.