The Department of Justice launched a lawsuit on Tuesday to block JetBlue’s proposed $3.8 billion acquisition of Spirit Airlines, launching a lawsuit to stave off further consolidation of the airline industry.
The merger would have created the fifth-largest airline in the U.S., but the move to block it marks a sharp turn from past precedents in which the government has approved mergers such as American-US Airways, United-Continental, Delta-Northwest and Southwest-AirTran.
JetBlue and Spirit argued that they needed to merge in order to compete against the four largest U.S. airlines — Delta Air Lines, American, United and Southwest Airlines — which already dominate about 80% of the U.S. market.
However, the DOJ didn’t buy the argument.
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The DOJ said it believed that a merger between JetBlue and Spirit would ultimately cause fares to increase, since a combined airline would have fewer seats and wouldn’t be able to fully recover from its losses without charging more for airfare.
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Since JetBlue planned to fully integrate Spirit into its airline, the DOJ also argued that it would effectively eliminate the largest ultra-low-cost carrier in the U.S., which has “increased competition and brought low fares to hundreds of routes across the country, making it possible for more Americans — particularly the most cost-conscious — to travel,” the lawsuit read.
President Joe Biden’s administration has adopted a hawkish stance on antitrust laws, with the DOJ aggressively suing to block mergers between major companies. For example, a judge blocked a merger between publishing giants Simon and Schuster and Penguin Random House after the DOJ filed a lawsuit. The DOJ is also planning to sue Adobe and Figma over their $20 billion merger.
The lawsuit also said JetBlue’s takeover of Spirit would stop Spirit’s growth, citing evidence that the ultra-low-cost carrier has doubled in size over the past 10 years and was on track to expand even more before the deal.
“Over the next five years Spirit plans to add nonstop service to several routes JetBlue flies today,” the lawsuit read. “The acquisition stops this future competition before it starts.”
The DOJ is currently attempting to hamper a partnership between JetBlue and American Airlines in Boston and New York, known as the Northeast Alliance. A decision on that partnership is also expected to be released in the near future.
And the DOJ lawsuit also chastises JetBlue’s partnership with American, saying the New York-based carrier has “evolved” from fashioning itself as a disrupter to the airline industry with its low fares and amenities to closely aligning itself with the interests of the Big Four airlines through the Northeast Alliance. The lawsuit stated that JetBlue doesn’t compete with American on capacity decisions and shares revenue for flights from New York and Boston, and a merger with Spirit would prevent JetBlue from having to compete with another carrier.
“In other words, JetBlue no longer competes with American Airlines on those flights — and if this acquisition happens, Spirit won’t either,” the lawsuit read.
This is a breaking news story. Stay tuned for more updates.
