The Biden administration filed a lawsuit Tuesday to block JetBlue Airways’ purchase of Spirit Airlines for $3.8 billion, saying the deal would reduce competition and increase airfares for consumers.
The Justice Department said the link would particularly harm cost-conscious travelers who rely on Spirit to find cheaper options than they can get from JetBlue and other airlines.
attentive General Merrick Garland would hold a press conference to announce the lawsuit – a sign of the government’s commitment to halting further consolidation in the aviation industry.
JetBlue and Spirit had been anticipating the government’s challenge for weeks. The government had previously requested additional documents and explanations regarding JetBlue’s proposal to acquire Spirit, the country’s largest low-cost carrier. Negotiations for a possible agreement failed.
The Justice Department said in the lawsuit filed in federal district court in Boston that the deal would end direct competition between JetBlue and Spirit and Spirit, the nation’s largest “ultra-low-cost airline,” would to eliminate.
“If the acquisition is approved, JetBlue plans to abandon Spirit’s business model, remove seats from Spirit’s aircraft and charge Spirit customers higher rates,” the ministry’s lawyers wrote. “JetBlue’s plan would eliminate the unique competition that Spirit offers — and about half of all ultra-low-cost airline seats in the industry — leaving tens of millions of travelers with higher fares and fewer options.”
As there were mounting signs that the government would challenge the bond, JetBlue CEO Robin Hayes and other company executives launched a pre-emptive campaign to claim the deal would help consumers by creating a stronger competitor for consumers. for more than 80% of the domestic air transport market.
Hayes said Tuesday he was disappointed but not surprised by the lawsuit.
“When we received Spirit’s shareholder-approved offer last year, we said we didn’t believe we would close until the first half of 2024, pending a hearing,” he said on CBS Mornings.
The Justice Department has come under pressure from Democratic lawmakers and consumer advocates who complained about a spate of past mergers that were approved by regulators and resulted in fewer airlines holding a larger market share. Government concerns about airline industry consolidation became evident in 2021, when the Justice Department filed a lawsuit to end a limited partnership between JetBlue and American Airlines in the Northeast.
JetBlue claimed to hope the government would follow through on its argument that the combination with Spirit was much smaller than other deals and would help consumers by putting pressure on the larger airlines.
Together, JetBlue and Spirit will control just over 9% of the domestic aviation market, much smaller than American, Delta, United and Southwest. JetBlue executives have repeatedly said their deal is not like Pepsi buying Coca-Cola — a statement Hayes reiterated on Tuesday.
They said the Justice Department created the environment of four dominant airlines and that JetBlue simply wanted a better chance to compete with the giants – all of which grew through mergers and acquisitions between 2008 and 2013.
The Justice Department filed a lawsuit to block the latest mega deal, American’s merger with US Airways, and subsequently reached a settlement that required airlines to give up certain gates and runways at several major airports. Previously, the government allowed Delta to buy Northwest and United to merge with Continental, and later allowed Southwest to buy AirTran.
Last year, JetBlue won a bidding war with Spirit against Frontier Airlines. Frontier CEO Barry Biffle argued that regulators would block a JetBlue Spirit deal but have no affiliation with Frontier, another low-cost carrier.
American and JetBlue are still awaiting the fate of a partnership that will allow them to collaborate on planning and share revenue in Boston and New York. A federal judge in Boston is expected to make a decision soon after a no-jury trial last fall.
Shares of all major US carriers rose Tuesday after the lawsuit was filed, except for JetBlue, which fell slightly in late morning trading.
Source: LA Times
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
