Spirit Airlines rises premarket after group, JetBlue appeal ruling blocking merger

Investing.com -- Shares in Spirit Airlines (NYSE:SAVE) moved higher in premarket U.S. trading on Monday after the budget carrier and JetBlue Airways (NASDAQ:JBLU) announced that they had appealed a federal court decision blocking their proposed merger on antitrust concerns.

Last week, U.S. District Judge William Young ruled that the proposed $3.8 billion tie-up would hurt consumers by leading to higher fares. Late on Friday, the airlines filed an appeal to his decision to the 1st Circuit Court of Appeals, adding that the move was "consistent with the requirements of the merger agreement."

Spirit has been attempting to salvage the deal as it attempts to confront a range of financial difficulties, including the grounding of many of its jets due to issues with RTX's Pratt&Whitney Geared Turbofan engines. Spirit was also hit hard by travel restrictions during the COVID-19 pandemic, and its low-budget business model has hampered its recovery by crimping its ability to raise ticket prices to offset a jump in fuel costs.

Analysts at Citi flagged that the appeal "seems unlikely to make a difference," calling it a "long-shot." Although it remains unclear how long the merger process will take, JetBlue faces a July deadline to complete the deal.

"[I]t is hard to understand what these carriers might say to the [1st] Circuit Court of Appeals, which could differ dramatically from their most recent, losing arguments," the Citi analysts said in a note to clients on Monday.

Spirit's stock price soared by more than 17% on Friday after the company revealed preliminary quarterly operating revenue that topped analyst expectations.

In a securities filing, Spirit estimated that it will post fourth-quarter operating revenue of $1.32 billion. Adjusted operating margin is also anticipated to come in at -12% to -13%, an improvement from its prior guidance of -15% to -19%. Bloomberg consensus forecasts see the figures at $1.3B and -15%, respectively.

Florida-based Spirit said that bookings over the peak holiday travel period were "strong," while expenses are seen coming in "better than expected" thanks to lower airport costs and greater fuel efficiency. The full fourth-quarter results are set to be released on Feb. 8.

The group added that it took "several steps" over the course of its previous three-month period to bolster liquidity, including an extension of a revolving credit facility and sale-leaseback transactions related to 20 aircraft that resulted in net cash proceeds of approximately $419 million.