The U.S. Justice Department challenged JetBlue Airways Corp.’s $3.8 billion acquisition of Spirit Airlines Inc., filing an antitrust lawsuit seeking to block the deal.
In a complaint filed in federal court in Boston, the Justice Department said the combination would lead to higher prices for consumers by eliminating Spirit as a deep fare discounter. Bloomberg had previously reported the move was likely to come as soon as Tuesday. New York, Massachusetts and Washington, DC joined in the antitrust suit.
“If the acquisition is approved, JetBlue plans to abandon Spirit’s business model, remove seats from Spirit’s planes, and charge Spirit’s customers higher prices,” the Justice Department said in its complaint. “JetBlue’s plan would eliminate the unique competition that Spirit provides — and about half of all ultra-low-cost airline seats in the industry — and leave tens of millions of travelers to face higher fares and fewer options.”
Spokespeople for JetBlue and Spirit didn’t immediately respond to requests for comment Tuesday.
The deal would make JetBlue the fifth-largest U.S. carrier based on domestic passenger traffic, giving it a broader network and the size to lure passengers away from larger competitors with lower fares and better onboard service.
Separately, the Department of Transportation is expected to block Spirit’s airline certificate transfer after determining the merger isn’t consistent with the public interest, according to people familiar with the case, who spoke anonymously to discuss an ongoing matter.
The decision is the first time in decades the transportation agency has invoked its authority to block certificate transfers, a power it has had since the Federal Aviation Administration was created in 1958.
DOT Action Expected
Although the Transportation Department is the primary regulator for the airline industry, it has generally deferred to the Justice Department to decide whether airline mergers pass muster on US antitrust law.
The lawsuit marks the second against JetBlue by the Biden Justice Department, which is also seeking to unwind its alliance in the northeast U.S. with American Airlines Group Inc. A judge has yet to issue a decision in that case following a trial last year.
The new lawsuit doesn’t immediately stop JetBlue’s acquisition of Spirit, but it means the companies must now look for concessions to appease regulators or prepare for a lengthy court battle.
Airline Consolidation
The DOJ decision reverses years of a laissez-faire attitude among regulators about airline industry concentration, which was tacitly encouraged over the past two decades after most carriers were forced into bankruptcy. Several were green-lit during the George W. Bush and Barack Obama administrations after relatively minor concessions such as giving up gates or flying slots at congested airports or in cities where the merged airline dominated service.
A wave of consolidation eliminated five of the 10 biggest U.S. airlines between 2005 and 2013 and left about 80 percent of domestic market share in the hands of four carriers.
JetBlue acknowledged Monday there was “a high likelihood” of a DOJ lawsuit, and said it would “vigorously pursue” any change in the DOT’s approach to takeovers and certificate transfers over the past 30 years. The carrier had tried to avoid an antitrust lawsuit by offering earlier to give up Spirit assets in Boston and New York and some parts of Florida.
The deal would remake Spirit in the mold of JetBlue, eliminating the largest of the country’s ultra-discount carriers that are favored by the most price-conscious travelers. It comes after JetBlue last summer bested an offer by rival Frontier Group Holdings Inc.
JetBlue’s planned conversion of Spirit’s jam-packed planes to a more roomy seating arrangement would likely result in higher average fares and reduced options for travelers, opponents had claimed. Spirit’s business model has offered rock-bottom fares in exchange for add-on fees for everything from a printed boarding pass ($25) to an in-flight cup of coffee or bottle of water ($4).
Separately, JetBlue agreed that the combined airline would add “hundreds” of new daily flights to Florida and create at least 1,000 jobs to help resolve concerns over the planned Spirit takeover, the Florida attorney general’s office said as it announced the end of an antitrust review. JetBlue also agreed to maintain all Spirit and JetBlue facilities in the state, and to pay $1 million to cover costs of the investigation and future compliance with the agreement.
