The Department of Justice filed a lawsuit Tuesday, stating JetBlue’s $3.8 billion acquisition of Spirit Airlines “will lead to higher fairs and few seats, harming millions of consumers on hundreds of routes.”
The DOJ argued that the budget-carrier’s potential growth with Spirit would pose a threat to other airlines. It also said the two airlines are “especially close and fierce head-to-head competitors.” Dominating particular areas of the country, the two airlines have around half the market for the Boston–Miami/Fort Lauderdale route and nearly 90 percent for the Boston–San Juan, Puerto Rico route.
JetBlue is anticipated to argue in the courtroom that the deal between the budget brands would lead to slowed prices in the sector. Since JetBlue and Spirit are relatively modest players in the US airline industry with only nine percent of the national market, it could prove difficult from the government to contend the merger would result in increased pricing. American, Delta, Southwest, and United Airlines have a combined 80 percent of the market.
A defending argument for JetBlue could be on a potential divestiture offer. The airline has claimed it intends to sell Spirit takeoff and landing rights, gates, and other associated facilities at LaGuardia, Newark Liberty, Boston Logan, and Fort Lauderdale airports. Past merging parties have had some victories in persuading judges to rule in opposition of the government, reasoning that the proposed asset sale resolves the matter.
As another plausible argument, the two cost-cutting carriers may keep the dominant-share airlines in check if they work together. Regardless of the arguments used, a court battle could last several months and cost tens of millions of dollars in legal fees. Analysts have said the lawsuit has created a less desirable arena for potential airline deals, at least for the duration of the Biden administration.
Add comment