JetBlue faces an antitrust lawsuit in an attempt by the US Justice Department to block the $3.8 billion takeover of budget rival Spirit Airlines.
The complaint claims that fares will rise and reduce choice on hundreds of routes where both airlines currently “compete fiercely”, harming cost-conscious fliers most acutely.
This is particularly the case on more than 40 direct routes where the two carriers’ combined market shares are so high that the deal is “presumptively anti-competitive”.
The acquisition would also make it easier for the remaining airlines to co-ordinate to charge travellers higher fares or limit capacity.
It alleges that JetBlue’s acquisition of Spirit would eliminate the ‘Spirit Effect’, where Spirit’s presence in a market forces other air carriers, including JetBlue, to lower their fares. The deal also would eliminate half of the ultra-low-cost capacity in the US, leading to higher fares and fewer seats, “harming millions of consumers on hundreds of routes”.
“By eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public,” the Department of Justice said.
US attorney general Merrick Garland said: “As our complaint alleges, the merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travellers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly.”
Associate attorney general Vanita Gupta added: “Our complaint alleges that JetBlue’s acquisition of Spirit would particularly hurt cost-conscious travellers.
“Ultra-low-cost carriers make air travel possible so more Americans can take a much-needed family vacation or celebrate or mourn together with loved ones. We allege that the proposed merger would lead to fewer seats and higher prices for travellers.”
JetBlue and Spirit insisted they would continue to advance plans to create a “compelling national challenger” to the big four airlines in the US.
“By coming together, we will expand JetBlue’s unique offering – where customers do not have to choose between a low fare and a great experience – to boost competition nationally,” they said in response to the lawsuit.
JetBlue chief executive Robin Hayes said: “Customers deserve a competitive airline marketplace and we will pursue this merger to ensure they get it, continuing to disrupt the legacy airlines with low fares and award-winning service that even the DoJ has applauded.
“We believe the DoJ has got it wrong on the law here and misses the point that this merger will create a national low-fare, high-quality competitor to the big four carriers which – thanks to their own DoJ-approved mergers – control about 80% of the US market.
“There is too much at stake for the DoJ to prevent us from bringing the JetBlue difference to more customers in more markets.”
Spirit chief executive Ted Christie said: “We disagree with the DoJ’s decision to seek to block the proposed merger, which will benefit consumers and employees.
“We will vigorously defend our position that a combined JetBlue and Spirit will be a game changer for customers nationwide, creating the most compelling national low-fare challenger to the dominant US carriers.
“Together, we intend to democratise flying for travellers across the country – a goal we believe is worthy of the government’s support.”
JetBlue flew almost 39 million passengers to 107 destinations around the world, earning about $9.1 billion in revenue in 2022 while Spirit carried more than 38 million to 92 destinations in the Americas, earning revenue of about $5 billion.