A federal judge has blocked JetBlue Airways (B6, New York JFK) from buying Spirit Airlines (NK, Fort Lauderdale International), agreeing with the United States government that the proposed USD3.8 billion deal would reduce competition and harm consumers by driving fares upwards.
US District Judge William Young sided with the United States Department of Justice’s view that the price-conscious consumers who “rely on Spirit’s unique, low-price model would likely be harmed” if the long-planned merger went ahead, even though it would also “likely place stronger competitive pressure on the larger airlines in the country.”
The government had proven, he said, as quoted by the Associated Press news agency, that the merger would “substantially lessen competition” and violate the country’s antitrust laws. “Spirit is a small airline, but there are those who love it. To those dedicated customers of Spirit, this one’s for you.”
Besides looking at the direct competition between the two airlines, the 17-day non-jury trial in Boston also focused on the possible impact on current routes and potential future markets. The judge agreed with the concerns raised about the tie-up, saying that the unique position ultra-low-cost carrier Spirit has in the aviation market remains crucial for maintaining competitive pricing.
He elaborated: “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. Worse yet, the merger would likely incentivise JetBlue further to abandon its roots as a maverick, low-cost carrier.”
As ch-aviation reported at the time, when the closing arguments were heard in the trial Young had hinted that the deal could go ahead if JetBlue agreed to forfeit more assets. JetBlue had already offered to divest gates and slots at Boston, Fort Lauderdale International, and New York Newark to quell antitrust concerns.
JetBlue and Spirit responded to the ruling in a joint statement: “We disagree with the US District Court’s ruling. We continue to believe that our combination is the best opportunity to increase much-needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant US carriers.”
The statement added that JetBlue’s having to terminate its Northeast Alliance with American Airlines (AA, Dallas/Fort Worth) last year “and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised. We are reviewing the court’s decision and are evaluating our next steps as part of the legal process.”
