The U.S. Department of Justice is suing to block JetBlue Airways’s proposed $3.8 billion acquisition of fast-growing rival Spirit Airlines, the agency announced March 7.
The two discount airlines currently compete on hundreds of routes serving millions of travelers.
Four domestic airlines—American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines— reportedly now make up around 80 percent of the market. JetBlue is said to be the sixth-largest airline. Acquiring Spirit would make JetBlue the fifth-largest.
JetBlue unexpectedly launched a bid for Spirit in April. Spirit countered that the deal was not likely to pass scrutiny by regulators but Spirit shareholders gave the deal their blessing in July, The Washington Post reported. JetBlue CEO Robin Hayes told the newspaper recently that he expected the deal would be finalized by early next year.
The DOJ argues that the merger would hurt consumers by curbing competition and further consolidating the domestic airline industry. In the process, the merger would drive up airfares and reduce choice on routes across the United States, boosting costs for the flying public and inflicting serious harm on cost-conscious flyers, the agency said.
The federal government filed the 39-page legal complaint (pdf) in U.S. District Court in Massachusetts that seeks to prevent the merger using the Clayton Antitrust Act of 1914. The attorneys general of Massachusetts, New York, and the District of Columbia are also plaintiffs in the new lawsuit.
The acquisition would eliminate Spirit, which the complaint called “the largest and fastest-growing ultra-low-cost carrier in the United States.” JetBlue views Spirit as “a serious competitive threat,” but instead of continuing to compete, JetBlue “plans to abandon Spirit’s business model, remove seats from Spirit’s planes, and charge Spirit’s customers higher prices.”
This would “eliminate the unique competition that Spirit provides—and about half of all ultra-low-cost airline seats in the industry—and leave tens of millions of travelers to face higher fares and fewer options.”
The complaint quotes Spirit saying: “A JetBlue acquisition of Spirit will have lasting negative impacts on consumers.”
At a DOJ press conference March 7, Doha Mekki, Principal Deputy Assistant Attorney General for the Antitrust Division, said both airlines have a history of enhancing consumer choice.
At the media event, Mekki hailed Spirit as an innovator that has spurred competition and helped consumers, and praised JetBlue for its history of promoting competition, which she called “the JetBlue effect.”
But she singled out Spirit for special praise, saying consumers have benefited from the “disruptive choices that Spirit made that the other airlines had to respond to.”
“The low-priced basic economy options that nearly all airlines offer today did not happen by accident,” she said.
Yet Spirit has thrived even while cutting prices, she said.
“Spirit is already six times larger today than it was in 2010. Even while the pandemic went on, Spirit stayed focused on its growth plans. It planned to double its fleet of airplanes by the end of 2025,” she said.
Spirit’s plans for future growth, such as adding flights to five new cities this year and to four important cities that JetBlue focuses on, will be nipped in the bud if the merger goes through, Mekki said.
“All that growth would have meant more competition for JetBlue and other airlines,” she said.
Travelers know they “will be better off if JetBlue and Spirit remain independent competitors.
If the two airlines merge, “travelers will no longer benefit from the head-to-head competition between Spirit and JetBlue that drives down airfares,” she said.
And in an industry already experiencing high concentration, “travelers will no longer benefit from the fact that Spirit has no obligation to follow the herd when it comes to the airline industry’s too frequent efforts to coordinate their price increases,” Mekki said.
JetBlue and Spirit issued a joint statement after the lawsuit was filed, saying they plan to move forward with the merger.
“JetBlue and Spirit will continue to advance our plan to create a compelling national challenger to the Big Four airlines,” they said in a statement JetBlue forwarded to The Epoch Times.
JetBlue CEO Robin Hayes said: “We believe the DOJ has got it wrong on the law here and misses the point that this merger will create a national low-fare, high-quality competitor to the Big Four carriers which—thanks to their own DOJ-approved mergers—control about 80 percent of the U.S. market.”
Spirit CEO Ted Christie added: “We disagree with the DOJ’s decision to seek to block the proposed merger, which will benefit consumers and employees. We will vigorously defend our position that a combined JetBlue and Spirit will be a game changer for customers nationwide, creating the most compelling national low-fare challenger to the dominant U.S. carriers. Together, we intend to democratize flying for travelers across the country—a goal we believe is worthy of the government’s support.”
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