Federal judge sides with Biden: JetBlue-Spirit merger won’t fly

U.S. District Judge William Young, citing concerns over stifling competition and removing a low-cost flying alternative from the market, blocked the JetBlue-Spirit merger. The Biden administration is touting the ruling as a progressive victory.

|
Seth Wenig/AP
If the merger went through, JetBlue airways would repaint and remove seats from Spirit planes so they could be incorporated as part of the main fleet.

A federal judge on Jan. 16 sided with the Biden administration and blocked JetBlue Airways from buying Spirit Airlines, saying the $3.8 billion deal would reduce competition.

The Justice Department had sued to block the merger, saying it would drive up fares by eliminating Spirit, the nation’s biggest low-cost airline.

U.S. District Judge William Young, who presided over a non-jury trial last year, said Jan. 16 that the government had proven that the merger “would substantially lessen competition” and violated a century-old antitrust law.

In his ruling, which ran more than 100 pages, the judge gave a nod to the Justice Department’s argument that Spirit is particularly important to travelers looking for an alternative to pricier airlines.

“Spirit is a small airline. But there are those who love it,” he wrote. “To those dedicated customers of Spirit, this one’s for you.”

Mr. Young said that a JetBlue-Spirit combination “would likely place stronger competitive pressure on the larger airlines in the country. At the same time, however, the consumers that rely on Spirit’s unique, low-price model would likely be harmed.”

Shares of Spirit Airlines Inc. plunged 47% after the ruling, while JetBlue shares gained 5%.

JetBlue and Spirit said they disagreed with the ruling and were considering whether to appeal.

New York-based JetBlue had argued that it needs the deal to grow in one move and better compete against bigger rivals that dominate the U.S. air-travel market.

“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,” the airlines said in a statement.

The ruling was a victory for the Biden administration, which has moved aggressively to block consolidation in several industries.

“Capitalism without competition isn’t capitalism – it’s exploitation,” President Joe Biden said on X, formerly known as Twitter. “Today’s ruling is a victory for consumers everywhere who want lower prices and more choices. My Administration will continue to fight to protect consumers and enforce our antitrust laws.”

For JetBlue, the ruling was its second major setback in federal court in less than a year. Another judge in the same Boston courthouse killed a partnership in the Northeast between JetBlue and American Airlines.

JetBlue, the nation’s sixth-largest airline by revenue, now must come up with another growth plan. That will be an assignment for incoming CEO Joanna Geraghty. Next month she will replace Robin Hayes, who had engineered both of the deals that have now been blocked in court.

The recent ruling could open the door for Frontier Airlines to make another attempt to buy Spirit. The two budget airlines announced a cash-and-stock deal in 2022, only to have JetBlue make an all-cash offer and win a bidding war for Florida-based Spirit.

Spirit’s CEO and board initially opposed a sale to JetBlue, arguing presciently that regulators would try to block a deal that would eliminate a low-cost carrier from the U.S. landscape – JetBlue planned to repaint Spirit’s planes and remove some seats to match JetBlue’s roomier interior.

To overcome that resistance, JetBlue agreed to pay Spirit a reverse breakup fee of $70 million and pay Spirit shareholders $400 million if the deal failed because of government opposition.

Helane Becker, an airline analyst for the financial services firm Cowen, said Spirit will likely now search for a new buyer, but it’s more likely to file for Chapter 11 bankruptcy restructuring.

Both JetBlue and Spirit have struggled to recover from the pandemic while their bigger rivals have returned to healthy profitability. JetBlue has lost more than $2 billion since the start of 2020, and Spirit – weighed down by higher costs and weaker demand – has lost more than $1.6 billion in that time.

That generated some sympathy for a merger between them – and criticism of the judge’s ruling.

“Blocking a merger of smaller competitors trying to combine resources and scale up to compete with the top four airlines makes little sense,” said Jessica Melugin, an antitrust expert at the Competitive Enterprise Institute, which opposes government intervention in the market. “It risks making both Spirit and JetBlue less able to compete with the big guys and ultimately leaving the airline industry less competitive, harming consumers.”

But the decision was praised by critics of mergers over the past 15 years that have eliminated Continental, Northwest, US Airways, AirTran, and Virgin America.

“This is an enormous victory for travelers, workers, and local communities, and another huge win for antitrust enforcers” at the Justice Department, said William McGee, an air-travel expert at the American Economic Liberties Project.

The government’s victory could make it more likely that it will challenge Alaska Airlines’ proposal to buy Hawaiian Airlines for $1 billion and pick up about $900 million in Hawaiian’s debt.

“The days of relentless consolidation are over. We hope to see judges presiding over future airline mergers, like Alaska-Hawaiian, follow Judge Young’s lead,” McGee said.

The government hasn’t said whether it will sue to stop Alaska from buying Hawaiian. The administration might have tipped its hand, however. “The Justice Department will continue to vigorously enforce the nation’s antitrust laws to protect American consumers,” Attorney General Merrick Garland said.

 This story was reported by The Associated Press.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Federal judge sides with Biden: JetBlue-Spirit merger won’t fly
Read this article in
https://www.csmonitor.com/USA/Justice/2024/0117/Federal-judge-sides-with-Biden-JetBlue-Spirit-merger-won-t-fly
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe