The Biden administration sued on Tuesday to block JetBlue Airways‘ $3.8 billion purchase of Spirit Airlines, saying the deal would reduce competition and drive up airfares for consumers.
The Justice Department said the tie-up would especially hurt cost-conscious travelers who depend on Spirit to find cheaper options than they can find on JetBlue and other airlines.
Attorney General Merrick Garland was scheduled to hold a news conference to announce the lawsuit — a sign of the importance that the administration places on stopping further consolidation in the airline industry.
JetBlue and Spirit have anticipated the government challenge for weeks. The government had previously requested additional documents and depositions about JetBlue‘s proposal to buy Spirit, the nation’s biggest budget airline. Negotiations over a possible settlement 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 eliminate Spirit, the nation’s biggest “ultra-low-cost carrier.”
“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 department lawyers wrote. “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.”
As signals grew that the government would challenge the tie-up, JetBlue CEO Robin Hayes and other company executives launched a pre-emptive campaign to make their argument that the deal would help consumers by creating a stronger competitor to the four carriers that control about 80% of the domestic air-travel market.
Hayes said Tuesday that he was disappointed but not surprised at the lawsuit.
“We said when we got the offer approved by the Spirit shareholders last year that we didn’t think we would close until the first half of 2024, expecting a trial,” he said on “CBS Mornings.”
The Justice Department was under pressure from Democratic lawmakers and consumer advocates who have complained about a wave of earlier mergers that regulators approved, and which left fewer airlines controlling a greater share of the market. The administration’s concern about airline-industry consolidation was on display in 2021 when the Justice Department sued to kill a limited partnership between JetBlue and American Airlines in the Northeast.
JetBlue held on to hope that the administration would come around to its argument that the combination with Spirit would be far smaller than other deals and would help consumers by putting pressure on the bigger airlines.
JetBlue and Spirit together would control a little over 9% of the domestic air-travel market, far smaller than American, Delta, United and Southwest. JetBlue executives repeatedly said their deal was not like Pepsi buying Coca-Cola - a line that Hayes repeated Tuesday.
They said the Justice Department created the environment of four airlines dominating the market, and JetBlue merely wanted a better chance at competing with the giants — all of whom grew through mergers and acquisitions between 2008 and 2013.
The Justice Department sued to block the last megadeal, American’s merger with US Airways, then reached a settlement that required the carriers to give up some gates and takeoff and landing slots at several major airports. Before that, the government allowed Delta to buy Northwest, United to merge with Continental, and it later let Southwest buy AirTran.
Last year, JetBlue won a bidding war over Spirit against Frontier Airlines. Frontier CEO Barry Biffle argued that regulators would block a JetBlue-Spirit deal but not a tie-up with Frontier, a fellow discount airline.
American and JetBlue are still waiting to learn the fate of a partnership that lets them work together on setting schedules and sharing revenue in Boston and New York. A federal judge in Boston is expected to soon issue a ruling, following a non-jury trial last fall.
Shares of all major U.S. airlines rose Tuesday after the lawsuit was filed except for JetBlue, which fell slightly in late-morning trading.
Copyright © 2023 The Washington Times, LLC.