A planned $3.8 billion takeover of Spirit Airlines by rival US budget carrier JetBlue has been blocked.
A federal judge in Boston agreed with the US Department of Justice that the deal agreed last summer was anti-competitive and would harm passengers.
JetBlue’s lawyers had called the case a “misguided” challenge to a merger between the country’s sixth- and seventh- largest airlines, which combined would control 10.2% of a domestic market dominated by four larger carriers.
However, district judge William Young ruled that the merger “would likely incentivise JetBlue further to abandon its roots as a maverick, low-cost carrier”.
“If JetBlue were permitted to gobble up Spirit – at least as proposed – it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline.
“It would further consolidate an oligopoly by immediately doubling JetBlue’s stakeholder size in the industry,” he said.
While the combination of JetBlue and Spirit would likely place stronger competitive pressure on the larger airlines in the US, consumers that rely on Spirit’s unique, low-price model would “likely be harmed”.
The two airlines “currently compete head-to-head throughout the country, and that competition, particularly Spirit’s downward pressure on prices, benefits all consumers,” Young said.
“Spirit’s unique position in the domestic scheduled passenger airline industry would be exceedingly difficult for another airline, or a combination of other airlines, to replicate, even with low barriers to entry and the dynamic nature of the industry inasmuch as they face the same, industry-wide aircraft sourcing issues.”
Young added: “While it is understandable that JetBlue seeks inorganic growth through acquisition of aircraft that would eliminate one of its primary competitors, the proposed acquisition, in this court’s attempt to predict the future in murky times, does violence to the core principle of antitrust law: to protect the United States’ markets – and its market participants – from anticompetitive harm.”
The two airlines can appeal the ruling.
In a joint statement, JetBlue and Spirit said they were evaluating “next steps as part of the legal process”.
US attorney general Merrick Garland hailed the ruling by the district court for Massachusetts as “a victory for tens of millions of travellers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward”.
He added: “The Justice Department will continue to vigorously enforce the nation’s antitrust laws to protect American consumers.”
Principal deputy assistant attorney general Doha Mekki, of the Justice Department’s antitrust division, added: “We are particularly encouraged by the court’s acknowledgement of the role of the Justice Department in protecting consumers ‘who otherwise would have no voice’ and the ‘forthrightness, civility, and zealous advocacy’ that ‘assisted the court in reaching out for justice’.”