Biden administration sues to block JetBlue’s takeover of Spirit Airlines
The Justice Department has filed an antitrust suit to block JetBlue’s $3.8 billion acquisition of budget competitor Spirit Airlines, alleging it would raise airfare prices and harm consumers.
The lawsuit filed Tuesday in Boston federal court alleged that the merger would eliminate “the unique competition that Spirit offers” and leave millions of air travelers facing “higher fares and fewer options.”
“The impact of this merger will be particularly damaging to travelers who rely on so-called ultra-low-cost airlines to fly,” Attorney General Merrick Garland said at a news conference.
In an interview with CBS morningsJetBlue CEO Robin Hayes argued that the merger would help consumers by positioning the airline to better compete with the big four airlines that collectively control 80% of the U.S. air travel market.
“This isn’t Pepsi buying Coke, together we’re going to take eight to nine percent of the market,” Hayes said. “Every time JetBlue flies into a market, the rates go down, it’s actually called the JetBlue effect.
The Justice Department has filed an antitrust suit to block JetBlue’s $3.8 billion acquisition of budget competitor Spirit Airlines
JetBlue CEO Robin Hayes (left) and Spirit CEO Edward M. Christie III (right) are seen above
The government’s complaint stated that JetBlue planned to remove 10% to 15% of seats from each Spirit aircraft and raise ticket prices for the remaining seats.
Fewer seats means fewer passengers – and higher prices for those who can still afford to get on the plane. This is unlikely to deter business travelers from flying on corporate expense accounts, but would put travel out of reach for many budget-conscious travelers,” the complaint read.
The lawsuit is the Biden administration’s latest attempt to counter further consolidation in industries that had previously undergone extensive merger activity.
It’s also because the government is taking other steps it says are aimed at increasing competition in the U.S. airline industry.
Massachusetts, New York and Washington DC joined the Justice Department’s complaint.
Shares of Spirit rose about 1.8% on Tuesday, after falling the previous day on expectations of a lawsuit. JetBlue shares had changed little.
In late July, JetBlue triumphed in a months-long bidding war for Spirit Airlines after the ultra-low-cost carrier accepted its bid for a competing bid from Frontier as JetBlue threatened to pursue a hostile takeover.
JetBlue said in a statement that it considered the possibility of a lawsuit when it gave a timeline to close the deal in the first half of 2024, giving the companies time to fight the government in court.
The Transportation Department, which is also reviewing the deal, is expected to take parallel action to halt the planned merger, Bloomberg News reported.
A JetBlue plane soars past Spirit Airlines planes at Fort Lauderdale-Hollywood International Airport in a file photo
JetBlue CEO Hayes said Monday he expected a government lawsuit would stop the deal and the company would fight it, the Wall Street Journal reported.
“My expectation is that we will be charged by the DOJ this week,” Hayes said. “I feel they came to the table with a firm resolve.”
Also on Monday, Florida Attorney General Ashley Moody said JetBlue and Spirit had struck a deal with the state to significantly increase seat capacity at Florida’s airports and add 1,000 jobs in the state to address the state’s antitrust concerns over the scheduled transaction.
Upon completion, the merged airline must increase seat capacity by at least 50% at both Fort Lauderdale and Orlando airports and must increase total seat capacity at all other Florida airports where either currently operates by at least 50% increase, Moody said, adding. pledges will bring hundreds of new daily flights to Florida.”
The companies have offered to sell Spirit’s interests in Boston and New York, along with some assets in Florida, in an effort to allay government antitrust concerns.
JetBlue is also awaiting the outcome of a separate lawsuit filed by the U.S. Department of Justice asking the court to force JetBlue and American to scrap the Northeast Alliance. There was a trial in the case last year.
JetBlue’s acquisition of Spirit was expected to face heavy antitrust scrutiny from the start, as the four largest airlines – American Airlines, United Airlines, Delta Air Lines and Southwest Airlines – control 80% of the US domestic market.
JetBlue has argued that the merger, which would create the fifth-largest U.S. carrier with a 9% market share, would allow it to better compete with the legacy carriers.
The companies have offered to sell Spirit’s interests in Boston and New York, along with some assets in Florida, in an effort to allay government antitrust concerns.