JetBlue Airways Airbus A320-232
Photograph ©2022 by Brian Cohen.

Justice Department Sues to Block Acquisition of Spirit Airlines By JetBlue Airways

The deal ain’t done yet...

The Justice Department sues to block acquisition of Spirit Airlines by JetBlue Airways, citing that the result would harm travelers in the United States due to further concentration and consolidation of the commercial aviation industry, which would result in higher fares and fewer choices across the country for tens of millions of travelers.

Justice Department Sues to Block Acquisition of Spirit Airlines By JetBlue Airways

JetBlue Airways Embraer E190AR
Photograph ©2022 by Brian Cohen.

Along with the attorneys general of the Commonwealth of Massachusetts, the state of New York, and the District of Columbia, the Department of Justice of the United States filed a civil antitrust lawsuit on Tuesday, March 7, 2023 to block the proposed $3.8 billion acquisition of Spirit Airlines, Incorporated by JetBlue Airways Corporation, alleging that the low-cost, no-frills flying option of Spirit Airlines has resulted in lower fares and more options to routes across the country and allowing for more Americans — particularly price sensitive consumers who pay their own fares — to travel.

“JetBlue’s acquisition of Spirit would eliminate the ‘Spirit Effect,’ where Spirit’s presence in a market forces other air carriers, including JetBlue, to lower their fares. The deal also would eliminate half of the ultra-low-cost capacity in the United States. This will lead to higher fares and fewer seats, harming millions of consumers on hundreds of routes”, according to this official press release from the Department of Justice of the United States. “The complaint, which seeks to block the acquisition under Section 7 of the Clayton Act, alleges Spirit has been a particularly disruptive force, growing rapidly, introducing innovative products, and allowing customers to choose which services to purchase, all while charging customers very low fares. Spirit has forced larger airlines, particularly the already-low-cost JetBlue, to compete for customers by introducing unbundled, customizable ticket options and lowering their own fares, allowing more Americans to travel. If the acquisition is allowed to proceed, prices would increase on routes where the two airlines currently compete. This is particularly the case on the over 40 direct routes where the two companies’ combined market shares are so high that the deal is presumptively anticompetitive.”

Brief History of the Proposed Acquisition of Spirit Airlines

Frontier Airlines
Photograph ©2022 by Brian Cohen.

A definitive merger agreement between Frontier Group Holdings, Incorporated and Spirit Airlines, Incorporated — which are the respective parent companies of Frontier Airlines and Spirit Airlines — was announced on Monday, February 7, 2022; and it would have resulted in the creation of the fifth largest airline in the United States once the merger is completed. The agreement was not fulfilled because the board of directors at Spirit Airlines voted on terminating its merger with Frontier Airlines, as they apparently wanted what they considered to be a superior offer from JetBlue Airways.

In a surprise move on Tuesday, April 5, 2022, JetBlue Airways confirmed that a proposal has been submitted to the board of directors of Spirit Airlines with the intent to acquire the airline for $33.00 per share in cash, which implies a fully diluted equity value of $3.6 billion and providing full and certain value to the shareholders of Spirit Airlines.

In 2022:

  • JetBlue Airways flew greater than 39 million passengers to approximately 107 destinations around the world, earning approximately $9.1 billion in revenue.
  • Spirit Airlines flew greater than 38 million passengers to approximately 92 destinations in North America and South America, earning approximately $5 billion in revenue.

Why This Is Important To You

Spirit Airlines
Photograph ©2018 by Brian Cohen.

With the consolidation of airlines over the years, airfares have generally increased — and not just due to the cost of inflation. When fewer choices are available, suppliers of products and services have more leeway to increase prices, reduce benefits and services — or both.

As airfares have been more expensive since the advent of the 2019 Novel Coronavirus pandemic — which caused people to want to travel again after being isolated or quarantined for months — ultra-low-cost carriers have become more important in providing transportation to cost conscious passengers who are on a budget, which includes college students, single parents, and senior citizens on fixed incomes.

Spirit Airlines has roughly doubled its network in size during the past ten years and was expected to continue expanding at a rapid pace — but this acquisition may stop this future competition before it starts.

Although it was once a preferred airline, a growing number of consumers, passengers, and frequent fliers have been complaining more about JetBlue Airways in recent months. Take away the option of Spirit Airlines, and the only airlines left besides the legacy carriers are Frontier Airlines and Southwest Airlines.

“If allowed to eliminate the Spirit option, JetBlue would likely increase prices on every route where Spirit flies today”, according to the aforementioned press release. “As a result, travelers who previously preferred Spirit’s lower-price, no-frills service would either have to pay more for amenities they do not want, or may no longer be able to afford to travel at all.”

JetBlue Airways has pledged significant growth in Los Angeles, Fort Lauderdale, and Orlando — by increasing the number of flights in Orlando from 77 daily departures to 200 daily departures in fewer than five years — if its acquisition of Spirit Airlines is approved and permitted to proceed.

Other Controversial Business Developments With JetBlue Airways

JetBlue Airways Airbus A320-232 aircraft
Photograph ©2014 by Brian Cohen.

In a different development, the Department of Justice of the United States — along with attorneys general in Arizona, California, Florida, Massachusetts, Pennsylvania, Virginia, and the District of Columbia — filed a lawsuit in the District of Massachusetts on Tuesday, September 21, 2021 to block an unprecedented series of agreements between American Airlines and JetBlue Airways through which the two airlines intend to consolidate their operations in Boston and New York into what has been called the Northeast Alliance.

Although JetBlue Airways and Qatar Airways have been partners since 2011 and announced the intent to expand their existing partnership to offer their customers even more benefits than they currently enjoy, Emirates Airline has also been one of the official codeshare partner airlines of JetBlue Airways for years — and some people were outraged pertaining to the announcement from the General Services Administration of the United States that it awarded the government contract for 2016 on the Washington-Dubai route to JetBlue Airways because JetBlue Airways does not actually offer service to Dubai from the United States. Rather, Emirates Airline was solely operating this route carrying an estimated 15,000 government employees of the United States, which includes active duty military personnel whose official travel is funded by taxpayers of the United States.

Moreover, a second government contract was reportedly awarded to JetBlue Airways for service between New York and Milan — even though JetBlue Airways does not actually offer service to Milan from the United States — and once again, Emirates Airline was actually the beneficiary of that contract, as it is the airline which operates service for that route as an official codeshare partner with JetBlue Airways.

Final Boarding Call

Spirit Airlines
Photograph ©2018 by Brian Cohen.

Is JetBlue Airways “doubling down on consolidation, seeking to acquire and eliminate its main ultra-low-cost competitor, depriving travelers of yet another choice”? Perhaps. Is the airline engaging in what may be considered questionable business practices? That is debatable.

The chief executive officers of American Airlines and United Airlines reportedly joined the chief executive officer of JetBlue Airways in opposing the lawsuit. Could that be a subtle indication of possible collusion?

“JetBlue and Spirit compete fiercely today on hundreds of routes serving millions of travelers”, according to the aforementioned press release pertaining to the Justice Department sues to block acquisition of Spirit Airlines by JetBlue Airways. “By eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely.”

That scenario is possible but not definite. Although some benefits can be realized from this acquisition — such as a larger network and possibly more flights — this development is worth following, as it could affect you financially and in terms of benefits and convenience pertaining to commercial aviation in the United States…

All photographs ©2014, ©2018, and ©2022 by Brian Cohen.

  1. You know we are in a rotten state of affairs when the “competition” in the country is batting for the “competition”, supposedly in the interest of “competition”, against a government standing up for American consumers in the aggregate.

  2. The DOJ Case against JetBlue/Spirit buyout is GOOD for tourism, the reason for this Case. In my opinion here are the possible outcomes.

    A. Less Seats or Service by the new JetBlue, resulting in higher fares for tourists.
    B. The new JetBlue removes all or some of its flights from certain markets since their Business model is completely different from Spirit and the overlap of flights. Ultra Low Cost vs Low Cost airline.

    As a consumer I am AGAINST the Buyout of Spirit Airlines by JetBlue:

    1. JetBlue plans to take an average of 30 seats off of all Spirit airplanes (roughly 15,000 seats a day out of the US Market) since Spirit is an Ultra Low Cost Airline, which will result in higher cost for the ultra low cost consumer when they convert Spirit Airline planes to JetBlue planes which is a lower cost airline. End result is high prices for the consumer. Not good for tourism consumers or for tourist Cities, Florida, and Countries.

    2. JetBlue has said that they also will give up all SPIRIT Airline Gates in Boston, LaGuardia, and Newark which will result in NO ultra low cost carriers (Frontier, Sun country, Spirit, and Allegiant airlines) in the market for years to come. JetBlue has said they give up Five gates in Fort Lauderdale, more higher prices for Tourism. Due to a shortage of airplanes and pilots, no other Ultra Low Cost Carrier has enough planes or pilots to fill those markets for the consumer for years. Which is one of the reasons that JetBlue has said that it is buying Spirit for its planes and pilots. This will also result in higher prices for consumers going from the northeast US to Florida.

    3. Since JetBlue’s business model as a Low Cost airline doesn’t fly into the following cities Atlantic City, Myrtle Beach, Latrobe, Pensacola, Manchester, Louisville, Columbus, Indianapolis, Memphis, Oakland, Norfolk, and other countries i. e. Nicaragua, when the two airlines are combined as JetBlue will probably pull out of these markets since they are only supported by Ultra Low Cost airline business models like Spirit. Spirit and JetBlue are apples and oranges, Spirit is an Ultra Low Cost airline (i.e. Frontier, Sun country, and Allegiant airlines) and JetBlue is a lower cost airline (i. e. Southwest, Alaska, and Hawaiian airlines). Spirit has No first class or Mint service like JetBlue has. Alaska, American, Delta, Hawaiian, and United all have First Class or Mint as JetBlue calls it First Class.

    Robin Hayes, CEO of JetBlue says he wants to keep the Northeast alliance with American Airlines. But then he goes on to say that JetBlue lowers the air fares of The Big Three airlines when JetBlue enters a market, not sure how you do that when you’re in an Alliance with American Airlines, one of the Big 3.

    This Buyout is about taking a strong and growing competitor (Spirit) off the playing field. JetBlue also benefits by acquiring planes and experienced crews in a very tight market for both.

    This Buyout is bad for the public, bad for industry competitiveness and pricing, and overall, bad for Florida Tourism.

    1. Thank you for imparting that information, mark grogan.

      Some people would benefit from the buyout; but I am not completely convinced that the benefits outweigh the disadvantages overall — especially for the reasons you outline.

      Furthermore, commercial aviation does not have a good ease of entry; so starting up a new airline to fill the possible void will be difficult — especially for a new ultra-low-cost airline.

      I intend to follow up on the developments regarding the legal matter in future articles…

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