US sues to block JetBlue from buying Spirit Airlines
March 7, 2023 By David Koenig, The Associated Press
The Biden administration sued to block JetBlue Airways’ $3.8 billion purchase of Spirit Airlines, saying Tuesday that the deal would reduce competition and drive up air fares for consumers.
The Justice Department said the tie-up would especially hurt cost-conscious travelers who depend on Spirit to find cheaper options than they can find on JetBlue and other airlines.
Attorney General Merrick Garland held a news conference to announce the antitrust lawsuit — a sign of the importance that the administration places on stopping further consolidation in the airline industry.
“If allowed to proceed, this merger will limit choices and drive up ticket prices for passengers across the country” and “eliminate Spirit’s unique and disruptive role in the industry,” he said.
The Justice Department lawsuit, filed in federal district court in Boston, stressed that the deal would mean the end of the nation’s biggest “ultra-low-cost carrier.” Those are airlines that generally provide the cheapest fares but also tend to charge more fees.
The Justice Department lawyers said Spirit’s demise would eliminate about half of all ultra-low-cost seats in the market.
New York, Massachusetts and the District of Columbia joined the lawsuit. JetBlue and Spirit vowed to continue fighting to salvage their agreement.
JetBlue and Spirit have anticipated a legal challenge for weeks. The Justice Department had previously requested additional documents and depositions about JetBlue’s proposal to buy Spirit, the nation’s biggest budget airline. Negotiations over a possible settlement failed.
As signals grew that the government would challenge the tie-up, JetBlue CEO Robin Hayes and other company executives launched a pre-emptive campaign to make their argument that the deal would help consumers by creating a stronger competitor to the four carriers that control about 80% of the domestic air-travel market.
Hayes said Tuesday that he was disappointed but not surprised at the lawsuit.
“We said when we got the offer approved by the Spirit shareholders last year that we didn’t think we would close until the first half of 2024, expecting a trial,” he said on “CBS Mornings.”
The lawsuit is the latest by the Biden administration to seek to block mergers in industries including video gaming, publishing and sugar refining.
In the JetBlue case, the Justice Department was under pressure from Democratic lawmakers and consumer advocates who have complained about a wave of earlier mergers that left fewer airlines holding a greater share of the market.
The administration’s concern about airline consolidation surfaced in 2021, when the Justice Department sued to kill a limited partnership between JetBlue and American Airlines in the Northeast. A federal judge in Boston is expected to issue a ruling soon, after a non-jury trial last fall.
JetBlue held on to hope that the administration would come around to its argument that the combination with Spirit would be far smaller than other deals and would help consumers by putting pressure on the bigger airlines.
JetBlue and Spirit together would control a little over 9% of the domestic air-travel market, far smaller than American, Delta, United and Southwest. JetBlue executives repeatedly said their deal was not like Pepsi buying Coca-Cola — a line that Hayes repeated Tuesday.
They said the Justice Department created the environment of four airlines dominating the market, and JetBlue merely wanted a better chance at competing with the giants — all of whom grew through mergers and acquisitions between 2008 and 2013.
The Justice Department sued to block the last megadeal, American’s merger with US Airways, then reached a settlement that required the carriers to give up some gates and takeoff and landing slots at several major airports. Before that, the government allowed Delta to buy Northwest, United to merge with Continental, and it later let Southwest buy AirTran.
Last year, JetBlue torpedoed a deal between Spirit and Frontier Airlines, then beat Frontier in a bidding war. Frontier CEO Barry Biffle argued that regulators would block a JetBlue-Spirit deal but not a tie-up with his airline, a similar discount carrier.
The largest union for flight attendants, the Association of Flight Attendants, reiterated its support for the merger Tuesday, which it said would lift pay and benefits for Spirit crews that it represents.
But the American Economic Liberties Project, which opposes corporate consolidation, praised the Justice Department for seeking to block the deal, saying it would let JetBlue “gobble up a low-cost competitor” and boost prices.
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