The United States Department of Justice has been sending out depositions in preparation for a lawsuit to block the shareholder-approved USD3.8 billion merger between JetBlue Airways (B6, New York JFK) and Spirit Airlines (NK, Fort Lauderdale International), a deal that could create the fifth largest US airline to compete with the four mainline US carriers.
News and data service provider Dealreporter cites unnamed well-placed sources saying the DOJ - under the new administration - was always expected to take action against the proposed deal. The Department is already taking JetBlue and American Airlines (AA, Dallas/Fort Worth) to court over their so-called Northeast Alliance commercial partnership announced in July 2020. A hearing on that case was held in September 2022 and is awaiting a final decision from a judge. Should the Northeast Alliance be unwound, it would be easier for JetBlue to win a potential case to purchase Spirit, according to Dealreporter.
The merger was approved by Spirit shareholders in October 2022 following a protracted bidding war between JetBlue and Frontier Airlines (F9, Denver International). When the latter refused to sweeten its offer, Spirit terminated a similar merger agreement with the Colorado-based ultra-low-cost carrier and opted to go with JetBlue, which reportedly upped its offer by 40%.
Meanwhile, JetBlue launched a public relations campaign in January to promote its plan to create a national low-fare challenger to the big four US mainline carriers, which dominate 80% of the market. "JetBlue wants to have the opportunity to more effectively compete with those legacy carriers. The most financially effective way we believe we can do that is by purchasing Spirit because we get access to more Airbus aeroplanes, [...] and we also get access to infrastructure in cities that tend to be very challenging to grow in," explains JetBlue Chief Financial Officer Ursula Hurley in a promotional video.
"Maybe the Justice Department has buyer's remorse on all the many mergers they approved before this. They've created this landscape [...]. They need a viable competitor. That should be a very attractive proposition and a very different one for [the] Justice [Department] than all the mergers before," comments Rob Land, JetBlue's Head of Government Affairs & Associate General Counsel.
Meanwhile, an antitrust lawsuit also trying to stop the merger is still before the US District Court, California Northern District (Oakland) (docket 4:22-cv-06841-JSW). A group of 25 passengers and travel agents are seeking a jury trial and a court order prohibiting the merger, claiming it a violation of Section 7 of the Clayton Antitrust Act, a 109-year-old piece of legislation that seeks to prevent anticompetitive practices in their incipiency.