Why is the Justice Department set to sue JetBlue and Spirit airlines?
‘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,’ the Justice Department said in the complaint
The Justice Department has sued to stop JetBlue Airways’ proposal to take over Spirit Airlines in a $3.8 billion deal.
CNBC reported that even though the arrangement of the takeover was agreed upon between the companies last summer, the Biden administration is set to stop industry consolidation.
Why is the Biden administration against industry consolidation?
The Deseret News reported in July 2022 that antitrust regulators were going to investigate the deal before it could gain approval.
The White House released a brief in July 2021, detailing an executive order to further increase competition in the economy by cracking down on corporate consolidation.
“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,” the Justice Department said in the complaint filed in court, according to Forbes. “Spirit itself put it simply: ‘A Jetblue acquisition of Spirit will have lasting negative impacts on consumers.’”
Politico reported the Department of Transportation is also deciding at this time whether or not to get involved in the deal but no comments from the DOT have been made at this time.
“Spirit and Frontier play a big role in the fare you pay, even if you never fly either one,” said Scott Keyes, founder of a website for finding better deals on flights, according to CNN. “When Delta announced the basic economy fare in 2012, they described it to investors as a ‘Sprit-matching fare,’ because their lunch was getting eaten by the budget carriers of the world. I’m not a fan of either merger, but I like the JetBlue option even less.”
Has JetBlue responded to the lawsuit?
JetBlue Chief Executive Robin Hayes told the Wall Street Journal that he expected this lawsuit as the government “seemed intent” to stop the deal from going through.
“My expectation is that we will get sued by the DOJ this week,” Hayes said. “My sense is they came to the table with their minds made up.”
WSJ also reported back in October that JetBlue fully understood it would have to prove to the Justice Department that combining the companies would not result in higher prices for travelers.
When the merger was decided upon, JetBlue said, per the WSJ, “today’s vote is a major milestone in our plan to join with Spirit to create high-quality, low-fare national challenger to the big four airlines.”