US sues to stop JetBlue’s deal for Spirit, cites consumer harm
The U.S. Justice Department has filed a lawsuit to prevent JetBlue Airways Corp from buying Spirit Airlines Inc, saying the planned $3.8 billion merger “will lead to higher fares and fewer seats, affecting millions of consumers on hundreds of routes.” harm”.
Attorney General Merrick Garland said Tuesday that Spirit’s internal documents show that when it enters a market, fares drop by 17 percent, while JetBlue’s internal documents show that when Spirit stops flying on a route, fares drop by 17 percent. rise 30 percent.
“The merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost airlines to fly,” Garland said. a press conference.
Spirit shares rose 3.8 percent to $16.98 on Tuesday afternoon, after falling the previous day on expectations of a lawsuit. JetBlue shares fell 0.5 percent to $8.36.
“We believe the DOJ is wrong about the law here and misses the point that this merger will create a national low-fare, high-value competitor for the Big Four airlines that – thanks to their own DOJ-approved mergers — about 80 percent of the U.S. market,” JetBlue CEO Robin Hayes said in a statement Tuesday.
“Too much is at stake for the DOJ to prevent us from bringing the JetBlue difference to more customers in more markets,” he added.
The lawsuit is the latest attempt by the Biden administration to counter further consolidation in certain sectors.
“Businesses in every industry should understand by now that this Justice Department will not hesitate to enforce our antitrust laws and protect American consumers,” said Garland.
The 39-page complaint, filed in Boston federal court, said the merger would “combine two particularly close and fierce competitors.” It called the deal “presumably illegal”.
The Justice Department, whose lawsuit was joined by Massachusetts, New York and Washington, D.C., also said JetBlue planned to remove 10 to 15 percent of seats from every Spirit aircraft.
“Less seats mean fewer passengers – and higher prices for those who can still afford to get on the plane. This probably won’t stop business travelers from flying with corporate expense accounts, but it would put travel out of reach for many budget-conscious travelers,” the complaint said.
JetBlue has argued that the merger, which would create the fifth-largest U.S. carrier with a 9 percent market share, was good for competition and better able to compete with the major carriers.
The Department of Transportation said on Tuesday it fully supports the lawsuit and plans to reject an exemption request asking the Department to allow the carriers to operate under common ownership prior to the requested transfer.
U.S. Judge Leo Sorokin will hear the case. Sorokin also heard the Justice Department’s lawsuit asking the government to force JetBlue and American Airlines Group Inc to scrap their Northeast Alliance. The companies are waiting for a decision after a trial last year.
Sorokin was nominated by then-President Barack Obama.
JetBlue had previously said it expected the deal for Spirit to close in early 2024, leaving time for litigation if necessary.
JetBlue triumphed in a months-long bidding war for Spirit Airlines after the ultra-low-cost carrier accepted its bid at the end of July.
From the outset, JetBlue’s acquisition of Spirit was expected to face a tough antitrust review because the four largest airlines — American Airlines, United Airlines, Delta Air Lines and Southwest Airlines — control 80 percent of the U.S. domestic market.
JetBlue and Spirit have offered to sell Spirit’s interests in Boston and New York, along with some Florida assets, in an effort to allay government antitrust concerns.
Florida Attorney General Ashley Moody cleared a state inquiry into the deal on Monday after the airlines agreed to increase seat capacity by at least 50 percent at both Fort Lauderdale and Orlando airports if the merger is completed.