US sues to prevent JetBlue from buying Spirit Airlines

JetBlue and Spirit have been waiting for a government call for weeks.

WASHINGTON — The Biden administration filed a lawsuit Tuesday to block Spirit Airlines’ $3.8 billion purchase of JetBlue Airways, saying the deal would reduce competition and increase airfare for consumers.

The Justice Department said such an agreement would hit frugal travelers especially hard, who rely on Spirit to find cheaper options than they can find with JetBlue and other airlines.

Attorney General Merrick Garland was expected to hold a press conference to announce the lawsuit, a sign of the importance the administration places on stopping further consolidation in the aviation industry.

JetBlue and Spirit have been waiting for a government call for weeks. The government has previously requested additional documents and testimony regarding JetBlue’s bid to buy Spirit, the nation’s largest low-cost airline. Negotiations for a possible settlement failed.

The Justice Department said in a lawsuit filed in federal district court in Boston that the deal would end direct competition between JetBlue and Spirit and eliminate Spirit, the country’s largest “superbudget carrier.”

“If the acquisition is approved, JetBlue plans to abandon the Spirit business model, remove seats from Spirit aircraft, and charge higher prices to Spirit customers,” the department’s lawyers wrote. “JetBlue’s plan will eliminate the unique competition that Spirit provides – and about half of all low-cost airline seats in the industry – and leave tens of millions of travelers with higher fares and fewer options.”

As signs grew that the government would challenge the tie, JetBlue CEO Robin Hayes and other company executives launched a preemptive campaign, arguing that the deal would help consumers by creating a stronger competitor for the four carriers. which control about 80% of the national air transportation market.

On Tuesday, Hayes said he was disappointed but not surprised by the lawsuit.

“When we got Spirit shareholder approval for the offer last year, we said we didn’t think we would close until the first half of 2024, pending litigation,” he told CBS Mornings.

The Justice Department has come under pressure from Democratic lawmakers and consumer advocates who have complained about a wave of earlier regulatory-approved mergers that left fewer airlines controlling more market share. The administration’s concerns about aviation industry consolidation became evident in 2021 when the Justice Department filed a lawsuit to dissolve the limited partnership between JetBlue and American Airlines in the Northeast.

JetBlue continued to hope the administration would come to terms with its argument that the Spirit bundling would be much smaller than other deals and help consumers by lobbying for larger airlines.

Together, JetBlue and Spirit will control just over 9% of the national air travel market, far less than American, Delta, United and Southwest. JetBlue executives have repeatedly said their deal is not like buying Pepsi Coca-Cola, a phrase Hayes echoed on Tuesday.

They said the Justice Department created an environment of four dominant airlines and JetBlue just wanted to have a better chance of competing with the giants that grew through mergers and acquisitions between 2008 and 2013.

The Justice Department sued to block the latest mega deal, American’s merger with US Airways, and then struck a deal that required carriers to give up some gates and take-off and landing spots at several major airports. Prior to this, the government allowed Delta to buy Northwest, United to merge with Continental, and Southwest to buy AirTran.

Last year, JetBlue won a bidding war between Spirit and Frontier Airlines. Frontier CEO Barry Biffle argued that regulators would block the JetBlue-Spirit deal, but not the association with Frontier, the discount airline.

American and JetBlue are still waiting to hear about a partnership that will allow them to work together on revenue planning and distribution in Boston and New York. A federal judge in Boston is expected to rule shortly after a non-jury trial last fall.

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