The Justice Department filed a lawsuit in an attempt to block a merger between JetBlue and Spirit Airlines, arguing the consolidation would hurt the airline industry.
The lawsuit, which was filed in the U.S. District Court for the District of Massachusetts, seeks to stop the merger because it would “eliminate the unique competition that Spirit provides.”
JETBLUE EXPECTING DOJ LAWSUIT TO BLOCK MERGER WITH SPIRIT
“We allege that JetBlue’s proposed takeover of Spirit will only exacerbate concentration and further stifle competition in the airline industry. JetBlue’s elimination of Spirit as an independent company increases the risk that the remaining airlines, including JetBlue, would coordinate to raise prices or reduce capacity on particular routes where Spirit currently operates,” Attorney General Merrick Garland said at a press conference.
The Justice Department cites Spirit’s ultra-low-cost airline fares as being “aggressive” and “disruptive” to the industry and that JetBlue’s plans to scrap the ultra-low-cost flights would hurt consumers.
“JetBlue’s proposed acquisition of Spirit would further increase the risk of coordinated behavior by eliminating Spirit’s aggressive, disruptive business model from the marketplace and by placing all of Spirit’s planes and crews under JetBlue’s control,” the court filing read.
“In short, 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 merger would see JetBlue takeover Spirit for $3.8 billion, with the deal being complete around the first half of 2024. Spirit shareholders approved the merger in October 2022. Spirit Airlines CEO Ted Christie called the merger the “most compelling national low-fare challenger to the dominant U.S. carriers.” The merger would see JetBlue use Spirit’s inventory and routes to elevate its offerings in terms of destinations.
JetBlue and Spirit pushed back on the Justice Department’s lawsuit in a joint release Tuesday. The airlines argued the merger will expand JetBlue’s “unique offering — where customers do not have to choose between a low fare and a great experience.” The release pointed out that the DOJ filing commends JetBlue for its “reputation for lowering fares.”
“Customers deserve a competitive airline marketplace, and we will pursue this merger to ensure they get it, continuing to disrupt the legacy airlines with low fares and award-winning service that even the DOJ has applauded. 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 U.S. market. There is too much at stake for the DOJ to prevent us from bringing the JetBlue difference to more customers in more markets,” JetBlue CEO Robin Hayes said Tuesday.
“We disagree with the DOJ’s decision to seek to block the proposed merger, which will benefit consumers and employees. We will vigorously defend our position that a combined JetBlue and Spirit will be a game changer for customers nationwide, creating the most compelling national low-fare challenger to the dominant U.S. carriers. Together, we intend to democratize flying for travelers across the country — a goal we believe is worthy of the government’s support,” Spirit CEO Ted Christie said.
The airlines argued a settlement with the state of Florida has already quelled fears of jobs and service being cut, boasting that they will increase capacity at several Florida airports. They also said the merged airline would still be smaller than the four major airlines in the U.S. and that there are extremely few routes to which the two airlines exclusively fly.
In anticipation of the lawsuit, Hayes told the Wall Street Journal that he expected the DOJ to sue to try to block the merger this week after signaling its opposition to it. He argued the merger is a “remedy” to the lack of competitiveness in the airline industry.
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The Department of Justice is separately suing JetBlue and American Airlines over the Northeast Alliance, an agreement that allows the two airlines to sell tickets on each other’s flights to popular destinations in the northeastern United States. It was designed to provide competition to United Airlines and Delta Air Lines’s dominance in the region.
Six states, Washington, D.C., and the Justice Department argue the Northeast Alliance between the two has upped costs by about $700 million annually, per a report. The two airlines in the Northeast Alliance have called the lawsuit by the DOJ “absurd,” saying that the department has no evidence that fares have increased as a result of the partnership.
