Justice Department files lawsuit to block JetBlue merger with Spirit Airlines

The Justice Department filed a lawsuit Tuesday to block a proposed merger between JetBlue and Spirit Airlines.

The $3.8 billion merger would create the nation’s fifth-largest airline, and the first US airline merger since 2016 when Alaska Airways bought Virgin Atlantic.

At a Justice Department news conference, Attorney General Merrick Garland said the merger would harm people who “can at least afford to see increased travel costs.”

“Ultra-low-cost carriers like Spirit play an important role in the economy,” he said. “They make air travel possible so more Americans can take a hard-earned family vacation or celebrate and mourn with loved ones.”

In anticipation of the DOJ lawsuit, JetBlue said the merger with Spirit would reduce costs for customers.

“The Big Four airlines have about 80% of the market locked in,” the company said in a statement. “JetBlue’s combination with Spirit allows it to create an attractive national challenge to these major airlines while ensuring [ultra low cost carrier] Options remain available in overlap markets.”

The company said it has already made changes ahead of the merger and that their routes do not overlap.

“JetBlue’s unique combination of low fares and great service is a competitive force that keeps legacy carriers on their toes and results in lower fares,” the company said.

In a lawsuit filed in Massachusetts federal court, the Justice Department said that allowing the merger would eliminate Spirit as “the largest and fastest growing ultra-low-cost carrier in the United States”.

Spirit, the Justice Department said, is giving cost-conscious Americans an alternative to travel, and by eliminating this business model, it hurts competition for consumers.

“If the acquisition is approved, JetBlue plans to abandon Spirit’s business model, remove seats from Spirit’s planes, and charge Spirit customers higher prices,” the lawsuit states. “JetBlue’s plan will eliminate the unique competition offered by Spirit—and nearly half of all ultra-low-cost airline seats in the industry—and leave millions of travelers to face higher fares and fewer options. Spirit put it simply: “The JetBlue acquisition of Spirit will have a lasting negative impact on consumers.”

Spirit’s model of separating out certain services, such as carry-on baggage, allows consumers to choose what they want to pay for, which is their “secret weapon”.

“The rest of the industry — including JetBlue — has been forced to respond to Spirit’s innovations and lower prices. Spirit estimates that average fares will drop 17% when it begins flying a route; JetBlue estimates that when Spirit stops flying a route, the average fare goes up 30%,” the lawsuit says. Spirit’s success – and the response of other airlines – has led to the “Spirit effect”: when Spirit enters a new route, prices for consumers of all airlines fall and demand for air travel increases. “

The DOJ argues that Spirit serves a different population – families traveling for vacation and not those traveling for work or anything else.

“An acquisition of JetBlue would also reduce competition with other airlines,” the suit states. “Airlines don’t always compete as aggressively as they could. Sometimes they take advantage of opportunities to soften competition through coordinated actions—such as “follow-the-leader” price increases—that lead to higher fares or less capacity. Spirit has recognized this. “No obligation” to “follow the herd” when it comes to mass industry price increases. In contrast, JetBlue has taken those few opportunities to coordinate has demonstrated its willingness to comply and will have an increased incentive to do so if the acquisition goes through.”

According to the DOJ, the acquisition will reduce Spirit’s growth and reduce the number of seats on Spirit’s aircraft. The department says JetBlue was disruptive when it entered the market, but has now transitioned into a “close ally” of the big four airline carriers.

“Spirit’s strategy of focusing on cost-conscious travelers has inspired other airlines to follow suit by introducing their own fare options to better compete,” the suit states.

The Justice Department noted that JetBlue has attempted to buy Spirit before in 2017 and 2019, unsuccessfully.

More broadly, Garland said the Justice Department will always keep middle-class families in mind — especially when it comes to things like airfare.

“Threats of competition like these are likely to harm working- and middle-class families, who may struggle to cope with the price increases that consolidation often brings. To ensure economic opportunity and fairness.” The Department’s commitment to this means keeping those concerns at the front of our minds. Keeping the economy open to all Americans, regardless of income status, is a priority across the Department.”

Vanita Gupta, third in charge at the Justice Department, said the merger was illegal because it violated the Clayton Act.

“In fact, under federal antitrust law, the transaction is estimated to be illegal on more than 150 routes and markets today were JetBlue and Spirit fly. Spirit’s business strategy, a unique business strategy over the years, has earned a reputation for being disruptive in the commercial airline industry.” has earned a reputation for. beset by high concentration and outdated populist practices. customers throughout the United States will benefit from a freer spirit. Simply put, where spirit competes, other airlines, including JetBlue, have won Responded by lowering airfares to attract more. After years of criticizing consolidation in the airline industry, JetBlue has changed its tune.”

Doha Mekki, principal deputy assistant attorney general for the antitrust division whose division is bringing the suit, said a previous agreement with American Airlines disqualifies JetBlue from the merger.

“Today JetBlue has already dedicated 75% of its capacity to American Airlines, which we believe hurts passengers. JetBlue was not done. JetBlue incorporated Spirit’s public courtship, which has been called more than one repeatedly rejected until Spirit finally accepted. An offer.”

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