US judge blocks JetBlue from acquiring Spirit Airlines

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1 year ago

A federal judge on Tuesday blocked JetBlue Airways’, opens new tab planned $3.8-billion acquisition of ultra-low-cost carrier Spirit Airlines, opens new tab after agreeing with the U.S. Department of Justice that the deal was anticompetitive and would harm ticket buyers.

The ruling by U.S. District Judge William Young of Boston, marked a victory for the White House in its efforts to prevent further concentration of the U.S. airline industry and raises questions about the viability of another recently proposed deal, such as Alaska Airlines’ planned acquisition of Hawaiian Airlines.

President Joe Biden called the ruling a “victory for consumers around the world who want lower prices and more choice,” Reuters reported.

The court’s decision that the deal violated U.S. antitrust law also called Spirit’s future into question. The low-cost airline has struggled to turn a profit amid rising operating costs and persistent supply chain problems.

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Young said that while a combination of JetBlue and Spirit would likely put “greater competitive pressure” on the large carriers that dominate the domestic airline market, “consumers who rely on Spirit’s unique low-fare model would likely be hurt.”

He said the deal would eliminate Spirit’s low fares and its ability to pressure other higher-priced airlines, including JetBlue, to lower prices. Rivals lower prices by 7% to 11% on average when Spirit enters a market.

“The Government has demonstrated that consumers value Spirit flights as a unique and economical product option,” Young wrote. “The elimination of Spirit as an option for consumers, therefore, would constitute cognizable harm.”

U.S. Attorney General Merrick Garland called the ruling a “victory for tens of millions of travelers who would have faced higher fares and fewer choices if the proposed merger between JetBlue and Spirit had been allowed to go forward.”

Although Young ruled in favor of the Justice Department, he did not go as far as the government had requested and broadly barred any combination of the two companies, saying he would only block the deal “in its current form.”

The judge said “the courthouse doors remain open in case the defendant airlines decide to try again.”

In a joint statement, JetBlue and Spirit said they were evaluating “next steps as part of the legal process.” They indicated that JetBlue had already “eliminated any reasonable anticompetitive concerns raised by the Department of Justice.”

Four U.S. carriers – United Airlines, American Airlines, Delta Air Lines and Southwest Airlines – control 80% of the market following a series of earlier mergers that the federal government approved.