JetBlue dumping partnership with American Airlines to salvage its Spirit purchase

(AP) – JetBlue says it won’t appeal a judge’s ruling against its partnership with American Airlines, effectively dropping the deal in an effort to salvage its purchase of Spirit Airlines.

JetBlue Airways said Wednesday that it wind down the deal with American in New York and Boston in the coming months and “turn even more focus” on its proposed $3.8 billion purchase of Spirit.

The U.S. Justice Department sued to block both the JetBlue-American deal and JetBlue’s purchase of Spirit on grounds that they would hurt competition. The government said consumers would suffer if Spirit — the nation’s biggest discount airline — is eliminated.

JetBlue hopes that dropping the deal with American might persuade the Justice Department to let the Spirit purchase go ahead.

A federal judge decided in May that JetBlue and American must end their partnership, called the Northeast Alliance, because it violates U.S. antitrust law. Shortly after JetBlue’s announcement Wednesday, American said it respects JetBlue’s “decision to focus on its other antitrust and regulatory challenges,” but it will press ahead with its own appeal in the case.

JetBlue’s decision to choose a purchase of Spirit over a geographically limited deal with American grew more likely in recent weeks, as JetBlue declined to say whether it would appeal the Northeast Alliance ruling.

While the deal with American helped JetBlue grow in one region of the country, buying Spirit would let JetBlue grow quickly to nearly 10% of the nationwide air-travel market. That would make JetBlue much closer in size to United, Delta, Southwest — and American.

Last month, JetBlue and American asked U.S. District Judge Leo Sorokin to let them keep selling tickets on each other’s flights, an arrangement called code-sharing, and offering reciprocal frequent-flyer benefits. It now appears that those features will also go away.