The Justice Department is suing JetBlue’s merger with Spirit Airlines

The Justice Department filed a lawsuit Tuesday to stop the proposed merger between JetBlue and Spirit Airlines.

The $3.8 billion merger would create the nation’s fifth-largest airline and would be the first U.S. carrier merger since 2016, when Alaska Airways bought Virgin Atlantic.

In a Justice Department press conference, Attorney General Merrick Garland said the merger would hurt those “who can least afford to see travel costs rise.”

“Ultra-low-cost airlines like Spirit play a key role in the economy,” he said. “They’re enabling air travel so more Americans can take a hard-earned family vacation or celebrate and mourn loved ones together.”

Pending a DOJ lawsuit, JetBlue said a merger with Spirit would reduce costs for customers.

“The Big Four airlines control about 80% of the market,” the company said in a statement. “JetBlue’s combination with Spirit allows it to create an attractive national challenger to these dominant airlines, while also ensuring [ultra low cost carrier] options remain available in overlapping markets.”

The company said it made changes even before the merger and their routes do not overlap.

“JetBlue’s unique combination of low fares and great service is a competitive strength that keeps legacy airlines on their toes and results in lower fares,” the company said.

In the lawsuit filed in Massachusetts federal court, the Justice Department said that if the merger goes through, Spirit would be eliminated as “the largest and fastest-growing ultra-low-cost carrier in the United States.”

Spirit, the Justice Department said, gives cost-conscious Americans the ability to travel, and by eliminating this business model, it harms competition for consumers.

“If the acquisition is approved, JetBlue intends to abandon Spirit’s business model, remove seats from Spirit’s aircraft and charge Spirit’s customers higher prices,” the lawsuit said. “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 facing higher fares and fewer options. Spirit itself said put it simply: “An acquisition of Spirit by JetBlue will have lasting negative consequences for consumers.”

Spirit’s model of unbundling certain services, such as carry-on luggage, allows consumers to choose what they want to pay for, which is their “secret weapon.”

“The rest of the industry – including JetBlue – has been forced to react to Spirit’s innovations and low prices. Spirit estimates that when it starts flying a route, average fares drop by 17%; JetBlue estimates that when Spirit stops flying a route, average fares go up by 30%,” the lawsuit says. , prices for consumers are falling across all airlines and demand for air travel is rising.”

DOJ claims Spirit serves a different demographic – families on vacation and not those traveling for work or anything else.

“The acquisition of JetBlue would also dampen competition with other airlines,” the suit says. “Airlines don’t always compete as aggressively as they could. Sometimes they take opportunities to soften competition through coordinated actions — such as “follow the leader” price increases — that lead to higher fares or reduced capacity. Spirit has recognized that this the case. “no obligation” to “follow the herd” when it comes to collective price increases in the industry. JetBlue, on the other hand, has already shown its willingness to go along with some of those opportunities to coordinate and would be more have incentives to do so if the acquisition goes through.”

The acquisition would curb Spirit’s growth and reduce the number of seats on Spirit’s planes, DOJ said. The department says that when JetBlue entered the market it was the disruptor, but has now moved to become a “close ally” of the four major airlines.

“Spirit’s strategy to target budget-conscious travelers has prompted other airlines to follow suit by introducing their own fare options to better compete,” the suit said.

The Justice Department notes that JetBlue has previously tried to buy Spirit, unsuccessfully in 2017 and 2019.

Garland said the Justice Department more generally will always keep middle-class families first, especially when it comes to things like airfare.

“Competitive threats such as those alleged here will particularly hurt working and middle-class families, who may struggle to withstand the price increases that consolidation brings. The Department’s commitment to economic opportunity and fairness means keeping these concerns in mind Keeping the economy open to all Americans, regardless of income status, is a priority across the department.”

This merger is illegal, said Vanita Gupta, third-party attorney at the Justice Department, because it violated the Clayton Act.

“Indeed, under federal antitrust law, the transaction is believed to be illegal on more than 150 routes and markets where JetBlue and Spirit fly today. For years, the corporate strategy for spirits, a unique business strategy, has earned a reputation for being a disruptor in a commercial airline industry plagued by through high concentration and old populist practices Customers in the United States will benefit from an independent spirit Simply put, where spirit competes, other airlines, including JetBlue, respond by vigorously competing and lowering the price of airline tickets to attract customers After many years of criticizing consolidation in the airline industry, JetBlue seems to have changed its tune.”

Deputy Deputy Attorney General Doha Mekki of the antitrust division, whose division is filing the lawsuit, said a previous suit filed with American Airlines disqualifies JetBlue from a merger.

“Today, JetBlue has already spent 75% of its capacity on American Airlines, which we believe is detrimental to passengers. The JetBlue was not done yet. JetBlue participated in the public wooing of the ghost, which was rejected more than once until the spirit eventually accepted an offer.”






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