Key Points:

  • The Justice Department argues that JetBlue Airways' proposed acquisition of Spirit Airlines for $3.8 billion could result in higher fares and reduced flights, advocating for a federal judge to obstruct the merger.

  • An internal JetBlue analysis indicates that fares could rise by 30% without Spirit as a competitor, potentially causing approximately $1 billion in annual harm to passengers.

  • The trial is a part of the Biden administration's broader initiative to reinforce antitrust enforcement and maintain competition among low-cost airlines.

Antitrust Trial Puts JetBlue-Spirit Merger in the Hot Seat

BOSTON — The U.S. Justice Department took a firm stance on Tuesday in a Boston federal court, asserting that JetBlue Airways' planned $3.8 billion acquisition of Spirit Airlines would lead to higher fares and reduced flights. During the opening of a pivotal antitrust trial, the government urged U.S. District Judge William Young to halt the merger, highlighting the Biden administration's commitment to preserving competition among low-cost carriers and keeping air travel affordable for American consumers.

Projections of Fare Hikes and Market Harm

Arianna Markel, a Justice Department attorney, emphasized in her opening statement the detrimental effects the deal could have, including fewer flights and seats and increased prices for millions of Americans. Markel cited a JetBlue internal study forecasting a 30% hike in its fares once Spirit is out of the competitive picture. Another Justice Department lawyer, Aaron Teitelbaum, brought attention to Spirit CEO Ted Christie's internal analysis showing the airline's role in lowering industry prices through its low-cost model.

Legal and Market Dynamics at Play

Ryan Shores, representing JetBlue, described the lawsuit as a misguided challenge to a merger between the nation's sixth and seventh largest airlines, which collectively control less than 8% of a domestic market dominated by four larger carriers. He argued that barring JetBlue from expanding would perpetuate a market unfavorable to competition and consumers. The trial coincides with JetBlue's announcement of lower-than-expected third-quarter results and a projected larger fourth-quarter loss, resulting in a notable decline in its shares.

Broader Antitrust Enforcement Efforts

The trial is part of the Biden administration's broader effort to enhance antitrust enforcement, which has seen mixed outcomes in court. Notably, JetBlue had already been implicated in a previous case concerning its partnership with American Airlines, which a different Boston judge ruled as anticompetitive, leading to the termination of the alliance. The case further underscores the administration's determination to regulate mergers that could potentially restrict market competition and harm consumers.