BOSTON, Dec 5 (Reuters) - Federal Judge William Young entertained the idea of permitting JetBlue Airways' proposed $3.8 billion acquisition of Spirit Airlines to proceed, despite the U.S. Justice Department's efforts to block the merger. The judge suggested that allowing the deal to go through would require JetBlue to divest further assets, as the antitrust trial reached its conclusion.

Judge Young expressed concerns that the absence of Spirit Airlines, known for its no-frills and ultra-low-cost services, could lead to higher fares in the airline industry. He explained that Spirit's ability to "undercut everyone else" and drive down prices might no longer be present.

While expressing hesitancy over the Justice Department's push for a permanent injunction, Judge Young proposed the option of additional divestitures by JetBlue. The airline has already agreed to sell-off gates and slots at airports in New York City, Boston, Newark, New Jersey, and Fort Lauderdale, Florida in an attempt to address regulatory concerns.

The trial began on Oct. 31 and reached its conclusion with closing arguments from both sides. The Justice Department, along with six U.S. states and the District of Columbia, filed the lawsuit in March, alleging that the merger would unlawfully harm competition in the airline industry.

Judge Young acknowledged that past cases have seen courts deem divestitures as close but insufficient, prompting the requirement for further divestitures to ensure competition. Although he clarified that his questions did not indicate his ruling stance, he asked Justice Department attorney Edward Duffy if a similar approach should be taken in this case.

Duffy argued that a full-stop injunction was the only viable remedy to restore competition. However, JetBlue attorney Ryan Shores asserted that Judge Young had the authority to craft an order incorporating additional divestitures.

The outcome of this trial is part of President Joe Biden's administration's broader efforts to maintain competition among low-cost airlines and enhance antitrust enforcement across industries. Thus far, these initiatives have yielded mixed results in court.

In his closing argument, Shores emphasized that the proposed merger would benefit consumers and positions JetBlue as a formidable challenger to dominant airlines in the industry. Currently, the four largest U.S. carriers - United Airlines, American Airlines, Delta Air Lines, and Southwest Airlines - control 80% of the domestic market, while JetBlue and Spirit combined represent approximately 8%, according to their legal representatives.

Shores further highlighted the financial challenges faced by lower-cost carriers like JetBlue and Spirit in contrast to larger airlines thriving amid the industry disruptions caused by the COVID-19 pandemic. Duffy countered by claiming that the merger would lead to higher prices and diminished flight options once Spirit, a lower-cost provider, ceased to compete. Duffy cited JetBlue's own forecast of a 30% fare increase as evidence.

"This transaction is a bad deal for consumers," Duffy asserted. "It risks reduction in competition."

Judge Young now holds the responsibility of reaching a decision in the non-jury trial, as he weighs the concerns raised by both sides and contemplates the possibility of divestitures as a means to safeguard competition in the airline industry.