Equus Asinus Delivers Kick to Free Markets

The Biden Department of Justice (DOJ) announced on Tuesday, 07 March 2023 that it had filed a lawsuit seeking to block JetBlue Airways' $3.8-billion purchase of Spirit Airlines.

In a 43-page document, the DOJ alleged the merger would reduce competition among U.S. domestic air-carriers and drive up consumer air-fares. Specifically, the department argued the deal would adversely impact low-income and cost-conscious travelers who depend on budget airlines—like Spirit—to provide bargain air-fares.

In their complaint, DOJ lawyers wrote: "If the acquisition is approved, JetBlue plans to abandon Spirit’s business model, remove seats from Spirit’s planes, and charge Spirit’s customers higher prices. JetBlue’s plan would eliminate the unique competition that Spirit provides—and about half of all ultra-low-cost airline seats in the industry—and leave tens-of-millions of travelers to face higher fares and fewer options."

JetBlue and Spirit, following the failure of negotiations for a possible out-of-court settlement, anticipated and have made ready for the federal government’s challenge.

JetBlue CEO Robin Hayes expressed disappointment but not surprise vis-à-vis the lawsuit, stating: "We said when we got the offer approved by the Spirit shareholders last year that we didn’t think we would close until the first-half of 2024, expecting a trial.”

JetBlue and Spirit executives repudiate the DOJ’s allegations and contend with conviction that the merger would, in fact, benefit American consumers by creating a stronger singular competitor to vie against the four carriers—American, Delta, United, and Southwest Airlines—by which approximately eighty-percent of the U.S. domestic air-travel market is controlled.

Contrariwise, Attorney General (AG) Merrick Garland supported the DOJ’s suit, arguing the complaint correctly cites the proposed merger’s violation of Section 7 of 1914’s Clayton Antitrust Act—a WWI-era statute that seeks to prevent anti-competitive business practices in their incipiencies.

Speaking at a news briefing, Garland declared: "By acquiring Spirit, JetBlue will eliminate the largest ultra-low-cost carrier in the United States.” The AG further alleged that JetBlue intends to remove seats from Spirit's aircraft for purpose of diminishing capacity and driving up air-fares.

"We allege that JetBlue's proposed takeover of Spirit will only exacerbate concentration and further stifle competition in the airline industry," Garland noted, adding that approval of the merger would increase the risk of remaining airlines coordinating to raise fares and reduce capacity.

Concluding, Garland trumpeted: "The Justice Department is suing to prevent that from happening.”

If the deal closes, JetBlue—contrary to Garland’s and the DOJ’s assertions—states it will expand its fleet and pilot cadre and retrofit the entirety of Spirit’s extant aircraft with additional legroom and improved in-flight entertainment systems. That the DOJ’s allegations of diminished capacity derive in part of JetBlue’s statement pertaining to increased legroom is probable. That the department has downplayed JetBlue’s intentions to expand its fleet and pilot cadre—thereby increasing capacity—is certain.

JetBlue CEO Robin Hayes said of the proposed merger: “We are excited to deliver this compelling combination that turbocharges our strategic growth, enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, on more routes. Spirit and JetBlue will continue to advance our shared goal of disrupting the industry to bring down fares from the Big Four airlines. This combination is an exciting opportunity to diversify and expand our network, add jobs and new possibilities for crewmembers, and expand our platform for profitable growth.”

Spirit Airlines president and CEO Ted Christie remarked: “We are thrilled to unite with JetBlue through our improved agreement to create the most compelling national low-fare challenger to the dominant U.S. carriers, and we look forward to working with JetBlue to complete the transaction. Bringing our two airlines together will be a game changer, and we are confident that JetBlue will deliver opportunities for our Guests and Team Members with JetBlue’s unique blend of low fares and award-winning service. We especially appreciate the commitment of our Spirit Family throughout this process.”

In the event the JetBlue-Spirit Airlines merger survives the Biden DOJ’s overreaching regulatory predilections, the composite and emergent fifth-largest U.S. airline will be based in New York and led by JetBlue CEO Robin Hayes.

FMI: www.jetblue.com