The Justice Department sued Tuesday to block JetBlue’s pending $3.8 billion acquisition of Spirit Airlines, arguing the deal would rob millions of American travelers of low-cost flying options.
The DOJ’s complaint argues that competition between JetBlue and Spirit has benefited cost-conscious consumers by bringing “low fares to hundreds of routes across the country.”
Eliminating that competition “would put travel out of reach for many cost-conscious travelers,” the suit alleges. Officials said JetBlue planned to remove 10% to 15% of seats from Spirit planes as part of the tie-up.
“The merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly,” Attorney General Merrick Garland told reporters.
The suit emerged as the Biden administration aims to crack down on consolidation among major airlines and other industries. The legal action also comes as the feds face pressure to address a breakdown in airline service over the last year that has included flight cancellations and baggage handling issues.
JetBlue shares sank 2.9%, while Spirit Airlines shares rose 4.7%.
A JetBlue-Spirit merger would have formed the fifth-largest US airline, behind American Airlines, United Airlines, Delta Air Lines and Southwest Airlines. The agreement was announced last year.
The Justice Department said in the lawsuit, filed in federal district court in Boston, that the deal would end direct competition between JetBlue and Spirit and eliminate Spirit, the nation’s biggest “ultra-low-cost carrier.”
“If the acquisition is approved, JetBlue plans to abandon Spirit’s business model, remove seats from Spirit’s planes, and charge Spirit’s customers higher prices,” the department lawyers wrote. “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.”
Spirit’s own internal estimates show that when it begins flying a route, average air fares plunge 17%, according to the complaint. JetBlue’s estimates show that fares rise by an average of 30% when Spirit abandons a route.
JetBlue and Spirit executives had long signaled that they expected the DOJ to challenge the merger.
The airlines argue that the deal would actually increase competition by creating a low-fare challenger to the “Big Four” carriers that already control 80% of the US market.
“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,” JetBlue CEO Robin Hayes said in a statement.
Spirit CEO Ted Christie added the deal would “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,” Christie said.
JetBlue would be required to pay Spirit shareholders a $400 million breakup fee if the deal unravels due to the antitrust challenge. JetBlue would pay an additional $70 million to the company itself.
Last year, JetBlue won a bidding war over Spirit against Frontier Airlines. Frontier CEO Barry Biffle argued that regulators would block a JetBlue-Spirit deal but not a tie-up with Frontier, a fellow discount airline.
American and JetBlue are still waiting to learn the fate of a partnership that lets them work together on setting schedules and sharing revenue in Boston and New York. A federal judge in Boston is expected to soon issue a ruling, following a non-jury trial last fall.