(Bloomberg) -- JetBlue Airways Corp. formally abandoned its pursuit of Spirit Airlines Inc. more than a month after a federal judge blocked the $3.8 billion acquisition on antitrust grounds.The carriers reached an agreement to walk away after determining that required legal and regulatory approvals “were unlikely to be met” by dates specified in the deal, JetBlue said Monday in a statement. The company — which is also facing pressure from activist investor Carl Icahn to return to sustainable growth — will pay Spirit $69 million and the agreement resolves all outstanding matters related to the deal. “The probability of getting the green light to move forward with the merger anytime soon is extremely low,” JetBlue Chief Executive Officer Joanna Geraghty told employees in an internal message. “The lingering uncertainty is distracting and taking our resources away from more pressing priorities.”The decision ends JetBlue's lengthy quest for Spirit and marks a sharp reversal after the companies pledged to fight for the tie-up — even as analysts said an appeal had little chance of succeeding. JetBlue had hoped to accelerate its growth with a quick infusion of Spirit's planes and pilots at a time when both are in short supply.Spirit shares fell 11% at 9:41 a.m. in New York after an earlier slump of as much as 16%. JetBlue rose 2.1%.Spirit confirmed the news in a separate statement, with CEO Ted Christie saying the carrier remains “confident in our future as a successful independent airline.”The deal had been on the ropes since a federal judge's ruling Jan. 16 that the acquisition of Spirit would violate antitrust laws by eliminating the nation's dominant deep-fare discounter, driving up prices and reducing competition.The effort to acquire Spirit “was a bold and courageous plan intended to shake up the industry status quo,” Geraghty told JetBlue workers, and the airline was right to challenge Frontier Group Holdings Inc. to secure the merger agreement.The payment to Spirit includes costs JetBlue was responsible for if the plan continued through the July termination date, JetBlue said. It includes lawyers' fees, financing costs and the remaining prepayments to Spirit shareholders that would have been required. JetBlue had already paid Spirit investors $425 million.It wasn't immediately clear whether Icahn's presence influenced the decision to drop the appeal. In the weeks since the deal was blocked, Icahn revealed a roughly 10% stake, making him one of JetBlue's largest shareholders. The carrier shortly thereafter gave the investor a pair of board seats, heading off a proxy fight.Conditions have changed drastically since the JetBlue takeover deal was forged in July 2022. Both carriers are grappling with a weakened domestic market, where too much capacity is holding down fares and costs are increasing. Both also are struggling with manufacturing problems at engine maker Pratt & Whitney that have forced the long-term grounding of some of their planes. The market value for Spirit, hit particularly hard by the engine issue, has fallen to around $630 million from $2 billion in the third quarter of 2022.New DirectionThe decision frees Geraghty from the prospect of working for years to integrate two dissimilar carriers and allows her to pursue a stand-alone plan for a return to profitability that she outlined recently. Under Geraghty, the airline is evaluating deeper cost cuts, delaying new aircraft and reworking its flight networkThe Spirit purchase would have added 200 planes and 3,000 pilots to JetBlue's ranks. Without them, JetBlue will remain as a second-tier competitor behind the industry's big four carriers. It had planned to end Spirit's no-frills discounts and reconfigure its aircraft with fewer seats.JetBlue warned earlier that it could terminate the deal on or after Jan. 28 because all the closing conditions “may not be satisfied” ahead of a requirement to complete the acquisition by late July.Wall Street analysts have speculated that Spirit could be forced into Chapter 11 bankruptcy or liquidation without the deal. The company has said it has sufficient liquidity to stand on its own. Former JetBlue CEO Robin Hayes stepped down on Feb. 12, citing health reasons. The collapse of the Spirit agreement leaves him 0 for 3 in major partnerships and planned acquisitions to strengthen the carrier. He lost out to Alaska Air Group Inc. in a 2016 fight to buy Virgin America, and last year a federal judge ordered JetBlue and American Airlines Group Inc. to dismantle their Northeast Alliance partnership in the Boston and New York areas. That venture also stymied competition, the judge found. American is appealing.--With assistance from Anne Cronin.(Updates with share trading in fifth paragraph)More stories like this are available on bloomberg.com©2024 Bloomberg L.P.