Antitrust regulators said the deal would reduce competition and raise fares. The companies argued it would allow them to better compete against the biggest U.S. airlines.
The Justice Department on Tuesday filed a lawsuit seeking to stop JetBlue Airways from buying Spirit Airlines, arguing that the $3.8 billion deal would reduce competition in a highly concentrated industry.
By absorbing Spirit, JetBlue would eliminate a disruptive force that has kept fares low across the country, the department’s antitrust division argued in its lawsuit. The merger would also give JetBlue an outsize hold on dozens of routes, result in higher fares and reduce options for travelers, particularly for those most sensitive to costs, it said.
“This merger will limit choices and drive up ticket prices for passengers across the country,” Attorney General Merrick Garland said at a news conference on Tuesday. The lawsuit was filed in U.S. District Court in Massachusetts. The Justice Department brought the case along with Massachusetts, New York and the District of Columbia.
The lawsuit is the latest example of the department’s aggressive approach to enforcing antitrust law under President Biden, suing to prevent mergers and challenging practices it considers anti-competitive across a variety of industries. The suit will put JetBlue’s plans on hold for at least a few months and possibly much longer. The company said that it was prepared to defend the acquisition and that it planned to close the deal in the first half of next year.
If the companies prevail, the deal will be the first major U.S. airline merger since Alaska Airlines acquired Virgin America in 2016. The deal would help JetBlue rapidly achieve a long-sought expansion, leapfrogging Alaska to become the nation’s fifth-largest carrier. JetBlue said that buying Spirit would also help it better compete with the nation’s largest airlines.
A series of large deals that culminated a decade ago greatly increased the power of the big four airlines. Even if JetBlue acquires Spirit, the new company will still have only about 10 percent of the U.S. air travel market. United Airlines, which is the fourth-largest carrier, has a 15 percent market share. American Airlines, Delta Air Lines and Southwest Airlines each have more than 17 percent of the business.
JetBlue has argued that consumers stand to benefit from the acquisition. The company has a reputation for challenging the larger carriers at airports in New York and Boston. And the Justice Department itself has credited the airline for lowering prices whenever it has entered a market, a phenomenon known as the JetBlue Effect.
“They’re losing perspective here as to the overall benefits,” JetBlue’s chief executive, Robin Hayes, said in an interview. “We are as committed to low fares as anybody else.”
But the Justice Department disagreed in its lawsuit, arguing that JetBlue has evolved from a disruptive force to an “ally of the big four” airlines. For example, the department pointed to the partnership between JetBlue and American in New York and Boston that allows them to more seamlessly sell seats on each other’s flights. The Justice Department sued to block that partnership, known as the Northeast Alliance, and a decision on that case is expected soon. The department said it would have sued to block the Spirit acquisition whether or not the Northeast Alliance was in place.
“This lawsuit is a very clear signal to the industry that no further consolidation is tolerable and that the government aims to block any further mergers or joint ventures,” said Diana Moss, the president of the American Antitrust Institute, a group that pushes for more aggressive enforcement of antitrust laws.
While JetBlue offers affordable ticket prices, Spirit offers even cheaper fares, making it a bigger threat to large airlines at the airports it serves, the department argued. Spirit is considered an “ultra low cost carrier,” a type of airline that works especially hard to keep costs and fares lower than those of most airlines. Among those carriers, Spirit stands out because it more frequently challenges the biggest airlines at their hub airports, according to the suit.
Under the deal, Spirit would largely be subsumed. The new airline would use the JetBlue brand, be based in New York City and be led by Mr. Hayes. It would have hundreds of planes and tens of thousands of employees. JetBlue has said that it plans to remove seats from Spirit’s densely packed planes to match its own configuration, which antitrust officials argued would make it difficult to keep costs and fares as low as Spirit has.
Mr. Hayes said that JetBlue would find ways to match Spirit’s savings without sacrificing customer service, such as using bigger planes, which can carry more passengers, on some routes.
“People should not assume the only way to get a cheap fare is with legroom that I think most people would view as very challenging,” he said. “We have a different model; we’re proud of that model. We would not be successful if we can’t cater to a customer group that is very price sensitive.”
To make money and offer cheap tickets, Spirit charges fees for services that other airlines offer at no additional cost. These can include boarding passes printed by an agent. That approach has frustrated many customers, but it has helped Spirit grow fast by attracting the most price-sensitive travelers, who would be most harmed by the merger, the Justice Department said.
The acquisition would substantially reduce competition on more than 150 routes that are flown by more than 30 million passengers every year, the department said. Along some of those routes, including some connecting Florida and Puerto Rico, JetBlue and Spirit are the only airlines that offer a significant number of flights.
Spirit has forced JetBlue itself to lower fares, the Justice Department argued. In 2020, after Spirit stopped its flights between Boston and Fort Myers, Fla., JetBlue increased fares.
The lawsuit comes less than a year after JetBlue made an offer to buy Spirit, spoiling a previously announced deal between Spirit and Frontier Airlines. Even if regulators block the deal, JetBlue has agreed to pay Spirit $70 million and its shareholders $400 million.
To address some antitrust concerns, JetBlue preemptively promised to give up Spirit’s holdings in New York, Boston and Fort Lauderdale, Fla. But the Justice Department said that the only sufficient remedy was for JetBlue and Spirit to remain independent airlines.
Justice Dept. Sues to Block JetBlue’s Acquisition of Spirit - The New York Times
Read More
No comments:
Post a Comment