DOJ sues JetBlue over Spirit takeover

DOJ sues JetBlue over Spirit takeover

A JetBlue Airways Airbus A320, left, passes a Spirit Airlines Airbus A320 as it taxis on the runway at Fort Lauderdale-Hollywood International Airport in Fort Lauderdale, Florida on Thursday, July 7, 2022.

Wilfred Lee | AP

The Justice Department filed a ban on Tuesday JetBlue Airways‘ $ 3.8 billion proposed acquisition of the low-cost airline Spirit Airlinesthe Biden administration’s latest attempt to thwart industry consolidation.

Spirit Airlines agreed to sell itself to JetBlue last summer after a long battle over the airline between JetBlue and JetBlue Frontier Airlines. The acquisition of Spirit by New York-based JetBlue faced a high hurdle from regulators and the airline from the start on Monday said it expects DOJ action this week.

JetBlue’s acquisition of Spirit would create the country’s fifth-largest airline and also eliminate Florida-based Spirit, with its business model of rock-bottom prices and fees for everything from carry-on bags to seat reservations.

“JetBlue’s plan would eliminate the unique competition that Spirit offers — and about half of all ultra-low-cost airline seats in the industry — and leave tens of millions of travelers with higher fares and fewer options,” the Justice Department said in his complaint filed in a Massachusetts court on Tuesday. “Spirit itself put it simply: ‘A JetBlue acquisition of Spirit will have a lasting negative impact on consumers.'”

At a news conference on Tuesday, Attorney General Merrick Garland stressed that the merger would be particularly damaging to “working-class and middle-class Americans who travel for personal rather than business reasons and who must pay for their own travel.”

The DOJ cited Spirit’s own internal documents showing that average fares drop 17% when the airline flies one route.

JetBlue has argued that the combination would allow it to better compete with major airlines that dominate the US market. The deal would also give JetBlue access to more Airbus jetliners and pilots, both of which are in short supply as travel demand remains strong.

JetBlue plans to convert Spirit’s bright yellow planes with packed seats to JetBlues, which include seatback umbrellas and more legroom.

“JetBlue competes fiercely with Spirit and sees it as a serious competitive threat. But instead of continuing that competition, JetBlue is now proposing a takeover, which Spirit describes as “a high-cost, high-fare airline acquiring a low-cost, low-cost airline.” fare airline,” the DOJ said.

New York, Massachusetts and Washington, DC also joined the lawsuit.

Merrick Garland, US Attorney General, speaks during a news conference at the Department of Justice in Washington, DC, U.S., Tuesday, March 7, 2023. The US Department of Justice approved the $3.8 billion acquisition of Spirit Airlines Inc . and filed an antitrust lawsuit to block the deal.

Ting Shen | Bloomberg | Getty Images

JetBlue and Spirit said in a joint statement on Tuesday that they will “continue to advance our plan to create a compelling national challenger for the Big Four airlines.”

“We believe the DOJ made a legal error here, missing the point that this merger will create a national low-price, high-quality competitor for the Big Four airlines which — thanks to their own DOJ-sanctioned mergers — are in control 80% of the U.S. market has it,” JetBlue CEO Robin Hayes said in a statement.

Spirit CEO Ted Christie said his airline will “vehemently defend” the merger and will defend itself against the Justice Department’s lawsuit.

“Together, we intend to democratize flying for travelers across the country – a goal that we believe deserves government support,” he said in a statement.

A JetBlue-Spirit combination would be the first major US airline merger since Alaska Airlines’ Acquisition of Virgin America in 2016. The then Department of Justice required Alaska to reduce its codeshare with American Airlines to complete the deal.

The Ministry of Justice also complained about the blockade American Airlines’ However, its 2013 merger with US Airways was completed, forcing American to sell dozens of gates and slots at congested airports like Washington Reagan National Airport.

The Biden administration has promised a hard line against deals it deems anticompetitive and has sued to block other mergers, such as Penguin Random House’s failed attempt to buy rival publisher Simon & Schuster. But the government has failed to halt several deals, such as one in the sugar industry last year and UnitedHealth Merged with Change Healthcare.

The government has also targeted the airline industry after a string of travel disruptions over the past two years, even after airlines received $54 billion in payroll payments to help weather the Covid pandemic.

Separately, JetBlue is awaiting a ruling on its Northeast partnership with American Airlines, which the Justice Department sought to reverse in 2021.

– CNBC’s Rebecca Picciotto contributed to this report.

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2023-03-07 20:18:46