US Justice Dept sues to block JetBlue-Spirit airline merger

The US Justice Department on Tuesday sued to block a $3.8 billion JetBlue-Spirit airline merger, saying that the combination would harm consumers and violate antitrust law.

The suit puts in jeopardy a transaction that JetBlue has characterized as consumer-friendly because it would create a stronger competitor to the “Big Four” carriers that dominate the United States market.

On Tuesday, the Justice Department said removing Spirit from the travel market would “eliminate the unique competition” it provides as a low-cost carrier.

This would “leave tens of millions of travelers to face higher fares and fewer options,” the department added in its complaint.

Neither JetBlue nor Spirit responded immediately to a request for comment on Tuesday’s Department of Justice (DOJ) action.

A JetBlue statement released Monday in anticipation of Tuesday’s move laid out “procompetitive” aspects of the deal, including “the JetBlue Effect,” when larger airlines Delta, United, American and Southwest were forced to cut fares due to JetBlue.

But the DOJ dismissed this argument in its complaint, saying that JetBlue has evolved from a “disruptor to closer ally of the Big Four.”

The department has also challenged an alliance between JetBlue and American Airlines that it argues impedes competition. The two sides presented arguments to a federal court in Boston in November, but a judge has yet to rule on that case.

Valuable disruptor

Tuesday’s US complaint, joined by Massachusetts and New York states and the District of Columbia, characterized Spirit as a valuable disruptor in air travel—an industry that has heavily consolidated over the last 15 years.

Spirit’s practice of “unbundling” features of flying to charge separately for carry-on bags, food and other items, has been “particularly important for cost-conscious travelers,” the DOJ said.

The US agency also cited Spirit’s initial resistance of the tie-up with JetBlue. Spirit had cited antitrust risk for a JetBlue deal, advocating for a merger with peer carrier Frontier that fizzled after JetBlue launched a hostile bid for Spirit.

At a press conference announcing the action, Attorney General Merrick Garland and other top officials described a series of ills that would result beyond the direct impact on airfares in markets where JetBlue and Spirit both fly.

They said that prior to the pandemic, Spirit had planned to double its fleet of airplanes by the end of 2025 and add flights to five more cities in 2023 alone.

“And if this acquisition is complete, all that growth would be over before it even has a chance to start,” said Doha Mekki, a deputy assistant attorney general.

Mekki also said that Spirit’s growth since 2010 spurred major carriers to unveil “basic economy” service on flights—no-frills tickets that are cheaper.

Shares of Spirit Airlines gained 3.2 percent to $16.90 in early-afternoon trading, while JetBlue dipped 0.2 percent to $8.39.

© 2023 AFP