The merger of JetBlue and Spirit Airlines may be up in the air after the US Justice Department announced that it was suing to stop the $3.8 billion deal from moving forward.
The move from the DOJ is the first time the government has tried to break up a US airline merger in nearly 20 years. Attorney General Merrick Garland says the lawsuit is necessary for several reasons, most notably, flight affordability.
“If not blocked, the merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers across the country. The Justice Department is suing to prevent that from happening,” Garland said.
The suit was officially announced on Tuesday and follows what Biden has said since entering office about businesses needing greater competition. More recently, the Biden administration has focussed on the airline industry, especially with the holiday meltdown from Southwest Airlines.
Spirit operates as a bargain airline that offers lower-priced tickets in exchange for other charges like carry-on bags. However, its lower prices often force larger carriers to reduce their ticket pricing in order to compete.
“Companies in every industry should understand by now that this Justice Department will not hesitate to enforce antitrust laws and protect American consumers,” Garland said.
JetBlue continues to argue in favor of the deal, pointing to other airlines that have merged since the turn of the century, which saw nine major US airlines turn into four, American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines.
Because those four airlines control as much as 80% of all air travel, JetBlue argues its merger with Spirit wouldn’t cause prices to rise but instead create stronger competition for the major carriers.
“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% of the US market,” JetBlue CEO Robin Hayes said following the announcement of the lawsuit. “There is too much at stake for the DOJ to prevent us from bringing the JetBlue difference to more customers in more markets.”
Hayes and his airline have pointed out that JetBlue and Spirit are not competitors, and because of this, they say competition would not decrease significantly.
However, Spirit, at one point, argued against JetBlue purchasing it, saying much of what Garland is arguing now. While announcing the lawsuit, the attorney general quoted the board when it said, “A court will be very concerned that a JetBlue-Spirit combination will result in a higher cost, higher fare airline that would eliminate a lower cost, lower fare airline and eliminate about half of lower cost capacity in the United States.”
After reading the quote, Garland put it simply, “We agree.”
To allow the deal to go forward, JetBlue has offered to give up some of its landing and takeoff slots and gates at crowded airports for other low-fare carriers instead.
“The combination of JetBlue and Spirit plus the rapid growth of ultra-low-cost carriers will assure increased competition and low fares,” JetBlue said in a statement.
As the legal proceedings progress, JetBlue has vowed to push on with its merger efforts in the hopes it defeats the suit by the end of the year so it can finish the deal by the time it initially planned.
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