In a pivotal decision on Tuesday, a federal judge in Boston thwarted JetBlue Airways’ ambitious $3.8 billion acquisition of Spirit Airlines. The ruling, by U.S. District Judge William Young, sided with the U.S. Department of Justice, deeming the deal anticompetitive and potentially detrimental to consumers.
JetBlue, labeling the case as “misguided,” faced accusations that the merger with Spirit, creating the nation’s sixth- and seventh-largest airlines conglomerate, would establish a formidable 10.2% control over a domestic market already dominated by four major airlines.
This legal victory for the White House aligns with President Joe Biden’s commitment to fostering airline competition, emphasizing lower prices and increased choices for consumers. The court’s decision also casts shadows over another proposed deal, Alaska Air’s acquisition of Hawaiian Airlines, raising questions about its viability.
The ruling highlights concerns over the future of Spirit Airlines, an ultra-low-cost carrier grappling with profitability challenges amid rising operational costs and persistent supply chain issues. Spirit’s shares plummeted by approximately 47% following the verdict, while JetBlue experienced a 5% surge in its shares.
Judge Young emphasized that while a combined JetBlue-Spirit entity could intensify competition against larger carriers dominating the market, it could harm consumers reliant on Spirit’s unique, low-price model. The removal of Spirit as an option, he argued, would eliminate the airline’s ability to exert pressure on competitors, ultimately diminishing consumer choice.
The ruling, citing a violation of U.S. antitrust law, prompts speculation about Spirit’s future, leaving the airlines the option to appeal. In a joint statement, JetBlue and Spirit conveyed their evaluation of “next steps as part of the legal process.”
Acknowledging the challenges faced by smaller airlines, JetBlue’s CEO and COO reassured employees of the company’s bright future, expressing readiness to forge ahead with a standalone organic plan if necessary.
U.S. Attorney General Merrick Garland hailed the decision as a victory for travelers, averting potential higher fares and limited choices resulting from the proposed merger. Although the ruling blocked the current deal, Judge Young left the door open for the airlines to explore alternative combinations.
Investors and analysts, wary of Spirit’s pre-existing troubles, had expressed concerns about the impact on JetBlue. The Justice Department, along with Democratic state attorneys general from six states, had argued that the merger would eliminate a crucial source of low-cost competitive disruption, causing substantial harm to consumers.
JetBlue, a higher-cost airline compared to Spirit, had attempted to address regulators’ concerns by agreeing to divest gates and slots at key airports. The Justice Department’s case aligns with the broader antitrust enforcement initiatives of the Biden administration, reflecting a nuanced approach to consolidations within the airline industry.
