top of page
  • Writer's pictureThe San Juan Daily Star

Justice Department sues to block JetBlue’s acquisition of Spirit

The Justice Department is suing to stop JetBlue Airways from buying Spirit Airlines.

By Niraj Chokshi

The Justice Department on Tuesday filed a lawsuit seeking to stop JetBlue Airways from buying Spirit Airlines, arguing that the $3.8 billion deal would reduce competition in a highly concentrated industry.

In the suit, the Justice Department said that by absorbing Spirit, JetBlue would eliminate a disruptive force that had kept fares low across the country. The merger would also give JetBlue an outsized hold on dozens of routes, result in higher fares and reduce choices for travelers, the department’s antitrust division said.

“This merger will limit choices and drive up ticket prices for passengers across the country,” Attorney General Merrick Garland said at a news conference on Tuesday. The lawsuit was filed in U.S. District Court in Massachusetts. The Justice Department brought the case along with Massachusetts, New York and the District of Columbia.

The lawsuit is the latest example of the department’s aggressive approach to enforcing antitrust law under President Joe Biden, suing to prevent mergers and challenging practices it considers anti-competitive across a variety of industries. The suit will put JetBlue’s plans on hold for at least a few months and possibly much longer. The company said Monday that it expected a lawsuit and planned to defend its deal in court.

If the companies prevail, the deal would be the first major U.S. airline merger in years. It would help JetBlue rapidly achieve a long-sought expansion, leapfrogging Alaska Airlines to become the nation’s fifth-largest carrier.

But even if the airline does acquire Spirit, JetBlue would still hold only about 10% of the U.S. air travel market. United Airlines, which is the fourth-largest carrier, has a 15% market share. American Airlines, Delta Air Lines and Southwest Airlines each have more than 17% of the business. A series of large deals over the past couple of decades has greatly increased the power of the big four airlines, which have acquired companies such as AirTran, TWA, Northwest, Continental and US Airways.

JetBlue has argued that consumers stand to benefit from the acquisition. The company has a reputation of challenging much larger carriers from airports in New York and Boston. A larger JetBlue, the company contends, would be able to compete even more vigorously, forcing the four dominant carriers to lower fares on more routes.

But the Justice Department disagreed. In its lawsuit, the department said JetBlue had evolved from a disruptive force in the industry to an “ally of the big four” airlines. JetBlue and American, for example, formed a partnership in New York and Boston that allowed each to more seamlessly sell seats on each other’s flights. The Justice Department has sued to block that partnership, known as the Northeast Alliance. A decision on that case is expected soon.

“Approximately 75% of JetBlue’s total capacity is tied up in the Northeast Alliance,” the Justice Department said in the suit. “That means JetBlue today coordinates its capacity decisions and shares its revenues with American Airlines on the vast majority of its flights. In other words, JetBlue no longer competes with American Airlines on those flights — and if this acquisition happens, Spirit won’t either.”

The Justice Department said Tuesday that it would have sued to block the Spirit acquisition whether or not the Northeast Alliance was in place.

Although JetBlue offers affordable ticket prices, Spirit offers even cheaper fares, making it a bigger threat to large airlines at the airports it serves, the department argued. Spirit is considered an “ultra low cost carrier,” a type of airline that works hard to keep costs and fares much lower than those of most airlines. Spirit stands out among those carriers because it more frequently challenges the big four airlines at their hub airports, the Justice Department said.

JetBlue has said it plans to remove seats from Spirit’s densely packed planes to match its own configuration, which antitrust officials argue would make it difficult to keep costs and fares as low as Spirit has.

To make money, Spirit charges fees for a wide range of services that other airlines offer at no cost. These can include printed boarding passes at airport kiosks. That approach has frustrated many customers, but it has helped Spirit grow fast by attracting the most price-sensitive travelers, the Justice Department said.

The acquisition would substantially reduce competition on more than 150 routes that are flown by more than 30 million passengers every year, the Justice Department said. Those flights generate about $6 billion in annual revenue for all airlines. Along some of those routes, including some connecting Florida and Puerto Rico, JetBlue and Spirit are the only airlines that offer a significant number of flights, meaning the merger would grant JetBlue a virtual monopoly on those routes.

JetBlue has promised to give up Spirit’s holdings in New York, Boston and Fort Lauderdale, Florida, but that isn’t enough to address concerns about competition, the Justice Department said.

JetBlue, which had to outbid Frontier Airlines to secure a deal with Spirit, has said it expects to close the acquisition in the first half of next year.

23 views0 comments

Recent Posts

See All

The Nasdaq surged on Thursday, with Alphabet and Advanced Micro Devices sparking a megacap rally on fresh optimism about artificial intelligence. Shares of Alphabet (GOOGL.O) jumped over 5% as analyst

bottom of page