On Tuesday, 7th March 2023, the US Department of Justice lodged a legal challenge directed at preventing the merger between JetBlue and Spirit Airlines, valued at $3.8 billion.
In recent weeks, it had been anticipated that the Biden administration would take action to prevent the creation of the nation’s fifth-largest airline through the scheduled merger, and the filing of the lawsuit to block the deal confirms the conjecture.
Last summer, JetBlue successfully won a bid to acquire Spirit Airlines after an extended struggle with Frontier Airlines. However, the Justice Department posed a new hindrance for JetBlue’s expansion plans, as it had already filed a lawsuit seeking to dissolve JetBlue’s Northeast partnership with American Airlines earlier in 2021.
After a lengthy battle with Frontier Airlines, JetBlue finally prevailed in its bid to takeover Spirit last summer. However, hurdles remained as the Justice Department had already sued to undo JetBlue’s Northeast partnership with American Airlines in 2021.
In its complaint filed on Tuesday in Massachusetts court, the Justice Department stated, “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.”
“Spirit itself put it simply: ‘A JetBlue acquisition of Spirit will have lasting negative impacts on consumers,'” the department added. “JetBlue competes hard against Spirit and views it as a serious competitive threat. But instead of continuing that competition, JetBlue now proposes an acquisition that Spirit describes as ’a high-cost, high-fare airline buying a low-cost, low-fare airline.”
JetBlue’s report advocating for the merger with Spirit Airlines was published just one day before the Department of Justice filed a lawsuit to prevent the deal. The report had touted the potential benefits of the merger for increasing competition, supporting other ultra-low-cost carriers, and lowering fares for passengers.
JetBlue stated, “JetBlue’s unique combination of low fares and great service is a competitive force that keeps the legacy carriers on their toes and results in lower fares. This is the ‘JetBlue Effect,’ an outcome specifically cited by the U.S. Department of Justice. An economic analysis found that JetBlue is proven on average to be over 3 times as effective at lowering legacy carrier nonstop fares than Spirit. With the scale unlocked by combining with Spirit, JetBlue will be able to bring down legacy carrier fares on more routes, benefitting more travelers than if JetBlue and Spirit continued as standalone airlines.”
The two carriers stated that they “will continue to advance our plan to create a compelling national challenger to the Big Four airlines.”
“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,” JetBlue CEO Robin Hayes said.
“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 percent 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.”
“We disagree with the DOJ’s decision to seek to block the proposed merger, which will benefit consumers and employees,” added Spirit CEO Ted Christie. “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.”
The Biden administration has sued to block other mergers too recently making clear its aim to stand against deals it considers anti-competitive.