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Monday, June 24, 2024 | Back issues
Courthouse News Service Courthouse News Service

Merger plans for JetBlue and Spirit Airlines spur government pushback

Federal and state officials argue that the combination of the two low-cost carriers would turn them into a higher-cost carrier.

BOSTON (CN) — In its continuing effort to stop consolidation in the airline industry, the Justice Department filed a lawsuit Tuesday to stop JetBlue Airways from buying low-cost carrier Spirit Airlines.

With 80% of domestic air travel now in the hands of just four carriers, competition has long been a preoccupation for antitrust authorities. When American Airlines and US Airways announced merger plans a decade ago, the department's lawsuit ended in a settlement that required American to give up a number of its routes. The department objected again in 2016 to Alaska Airlines’ takeover of Virgin Airways, again requiring a large number of changes.

Most recently, the department went to trial to block a joint venture between JetBlue and American in Boston and New York. Closing arguments in that contentious case were heard in November, and a decision is considered imminent.

The Spirit deal, valued at $3.8 billion, was announced last summer. Spirit had originally agreed to a merger with Frontier Airlines but that deal fell apart after JetBlue expressed interest.

Domestic U.S. air travel is dominated by legacy carriers American, Delta and United, as well as Southwest Airlines. JetBlue has positioned itself as a low-cost alternative, and its competition has famously driven prices down at the other carriers. Spirit and Frontier are considered “ultra-low-cost” carriers that offer no-frills service at even-cheaper prices.

Because there has been so much consolidation at the top of the industry, then government has been extremely concerned to preserve the independence of competitive lower-cost rivals.

“This merger will limit choices and drive up ticket prices for passengers across the country,” U.S. Attorney General Merrick Garland warned at a press conference Tuesday.

The buyout “would combine two especially close and fierce head-to-head competitors,” the government argued in its complaint. “JetBlue plans to abandon Spirit’s business model, remove seats from Spirit’s planes, and … leave tens of millions of travelers to face higher fares and fewer options.”

But JetBlue has fought back, arguing that the combined airline would still control less than 10% of the country’s domestic routes and would hardly be in a position to squash competition. "This is not Pepsi buying Coke," JetBlue CEO Robin Hayes tweeted.

The government is especially concerned because the lower-cost carriers cater to the consumer market as opposed to the legacy carriers that focus on business travelers. “This merger will be particularly harmful for … working- and middle-class Americans who travel for personal as opposed to business reasons and who must pay their own way,” Garland said.

The antitrust action has been anticipated for a while. In its efforts to forestall such a suit, JetBlue offered to give up all of Spirit’s holdings in Boston and New York and part of its market in Fort Lauderdale, which it said would leave plenty of room for other ultra-low-cost carriers to keep growing.

The District of Columbia, Massachusetts and New York state joined the Justice Department as plaintiffs in Monday's suit.

Spirit’s stock was up about 3.5% in midday trading. JetBlue’s was down slightly.

Categories / Business, Consumers, Government

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