The US Department of Justice (DOJ) has filed a lawsuit to block JetBlue Airways Corp’s planned $3.8bn acquisition of Spirit Airlines Inc, citing concerns that the merger would lead to higher fares and fewer seats, harming millions of consumers on hundreds of routes. Attorney General Merrick Garland said that Spirit’s internal documents showed that when it enters a market, fares fall by 17%, while JetBlue’s internal documents show that when Spirit stops flying a route, fares go up by 30%. The DOJ’s lawsuit was joined by Massachusetts, New York, and Washington, DC.
JetBlue CEO Robin Hayes argued that the DOJ had got it wrong on the law and missed the point that the merger would create a national low-fare, high-quality competitor to the Big Four carriers, which control about 80% of the US market. The merger would create the fifth-largest US carrier with a market share of 9%. JetBlue had previously said it expected the deal for Spirit to close in early 2024, leaving time for litigation if necessary.
The DOJ’s complaint, filed in Boston federal court, said the merger would “combine two especially close and fierce head-to-head competitors” and called the deal “presumptively illegal”. The DOJ also said that JetBlue planned to remove 10% to 15% of seats from every Spirit plane. “Fewer seats mean fewer passengers – and higher prices for those who can still afford to make their way onto the plane. This is unlikely to stop business travelers flying on corporate expense accounts, but would put travel out of reach for many cost-conscious travelers,” the complaint said.
The DOJ’s lawsuit is the latest attempt by the Biden administration to push back against further consolidation in certain industries. “Companies in every industry should understand by now that this Justice Department will not hesitate to enforce our antitrust laws and protect American consumers,” Garland said.
US Judge Leo Sorokin will hear the case. Sorokin also heard the DOJ lawsuit in which the government asked the court to force JetBlue and American Airlines Group Inc to scrap their Northeast Alliance. The companies are awaiting a decision after a trial last year. Sorokin was nominated by then-President Barack Obama.
JetBlue and Spirit have offered to sell Spirit’s holdings in Boston and New York, along with some assets in Florida, in a bid to ease the government’s antitrust concerns. Florida Attorney General Ashley Moody on Monday resolved a state probe into the deal after the airlines agreed to increase seat capacity by at least 50% in both Fort Lauderdale and Orlando airports if the merger is completed.
Spirit shares were up 3.8% on Tuesday afternoon at $16.98 after dipping the previous day on expectations of a lawsuit. JetBlue shares were down 0.5% at $8.36.