Justice Department Sues to Block JetBlue’s Acquisition of Spirit
The Department of Justice (DOJ), together with Attorneys General of the Commonwealth of Massachusetts, the State of New York, and the District of Columbia, filed a civil antitrust lawsuit today to block JetBlue Airways proposed $3.8 billion acquisition of its largest and fastest-growing ultra-low-cost rival, Spirit Airlines.
“JetBlue and Spirit compete fiercely today on hundreds of routes serving millions of travelers,” DOJ said in its statement. “By eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely”
The complaint alleges that Spirit’s low-cost, no-frills flying option has brought lower fares and more options to routes across the country, making it possible for more Americans to travel. JetBlue’s acquisition of Spirit would eliminate the “Spirit Effect,” where Spirit’s presence in a market forces other air carriers, including JetBlue, to lower their fares. The deal also would eliminate half of the ultra-low-cost capacity in the United States. “This will lead to higher fares and fewer seats, harming millions of consumers on hundreds of routes” DOJ says.
JetBlue responded to the lawsuit with its own statement, saying the two airlines will continue to advance their plan to create a compelling national challenger to the Big Four airlines. The Big Four “control about 80% of the market after years of industry consolidation that the DOJ itself approved” JetBlue says.
Even as the fifth-largest carrier, a combined JetBlue and Spirit will have only 9% market share, compared to 16-24% for each of the four largest airlines. Additionally, JetBlue and Spirit only overlap on 11% or less of the nonstop routes on which both of them fly.
As the merger moves toward trial, it’s likely that JetBlue will continue campaigning for the deal in an effort to sway public opinion. It already has some strong supporters such as the Association of Flight Attendants, which represents Spirit’s flight attendants. On the other hand, the Transportation Workers Union, which represents JetBlue flight attendants, opposes the deal.
