JetBlue Fights for Spirit Airlines Acquisition in Federal Court Trial
ICARO Media Group
BOSTON (AP) - JetBlue Airways is urging a federal judge to approve its acquisition of Spirit Airlines, arguing that the biggest U.S. airlines are leveraging their size to solidify their dominance in the post-pandemic era. The lawyer representing JetBlue, Ryan Shores, emphasized the urgency of the deal, stating that it is crucial for JetBlue to have Spirit as a viable challenger to the four major carriers that currently control the majority of the domestic air-travel market.
The closing arguments were presented in a federal court trial, where the U.S. Justice Department has filed a lawsuit to block JetBlue's $3.8 billion purchase of Spirit, the nation's largest low-fare carrier. Edward Duffy, the lawyer for the Justice Department, argued that this acquisition would lead to a 30% increase in fares and reduce budget-friendly options for travelers.
Duffy pointed out that if JetBlue absorbs Spirit, it would result in a significant reduction of ultra-low-cost carriers in the market, with 6 million fewer budget flights per year. He also criticized JetBlue for contradicting itself by claiming it needs Spirit's growth potential to challenge larger airlines, while suggesting that smaller low-cost rivals like Frontier Airlines would be capable of filling Spirit's void.
Highlighting the alleged disregard for passengers who cannot afford JetBlue's upscale experience, Duffy argued against the merger, stating that it would cause harm to consumers. The trial, spanning several weeks, featured testimony from the CEOs of both JetBlue and Spirit. U.S. District Judge William Young is expected to announce the ruling at a later date.
During the closing arguments, Judge Young posed questions to both parties involved. Notably, he asked Shores from JetBlue how long it would take for consumers to witness the promised benefits of the merger, such as increased competition against larger airlines. Shores responded by suggesting that it could take two to three years for the market to reach a post-merger competitive equilibrium.
A notable aspect of this trial is JetBlue's preemptive efforts to secure regulatory approval. Before the trial, the airline agreed to sell gates and slots at airports in Boston, the New York City area, and Fort Lauderdale, Fla. Judge Young inquired about the possibility of additional divestitures that might make the merger acceptable. However, Duffy dismissed the idea, arguing that the merger is fundamentally anti-competitive, requiring a full injunction.
The outcome of this trial is significant as it tests the Biden administration's stance on airline industry consolidation. Earlier this year, the Justice Department successfully challenged and dissolved a partnership between JetBlue and American Airlines in New York and Boston on antitrust grounds.
If JetBlue's acquisition of Spirit Airlines is approved, it could reshape the landscape of ultra-low-cost carriers in the United States. Spirit's absorption would position Frontier Airlines as the largest discount carrier, followed by Allegiant Air, Breeze, and Avelo. This deal would also propel JetBlue to fifth place among U.S. airlines by revenue, surpassing Alaska Airlines.
As the trial continues, Wall Street analysts have suggested that JetBlue may be paying too much for Spirit, which has faced challenges in recovering from the pandemic. However, JetBlue has shown no indication of reevaluating the deal. In the event of a successful court ruling, JetBlue plans to nearly double its fleet, rebrand Spirit's yellow planes, and enhance passenger comfort by removing some seats.
Shares of JetBlue and Spirit fell during early-afternoon trading on Tuesday, reflecting a broader market decline in the travel sector.
AP Airlines Writer David Koenig has contributed to this report from Dallas.