The US Department of Justice has filed a suit to stop JetBlue Airways Corp from buying Spirit Airlines Inc, saying the planned $3.8bn merger “will lead to higher fares and fewer seats, harming millions of consumers on hundreds of routes”.
Attorney General Merrick Garland said on Tuesday that Spirit’s internal documents showed that when it enters a market, fares fall by 17 percent while JetBlue’s internal documents show that when Spirit stops flying a route, fares go up by 30 percent.
“The merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travellers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly,” Garland told a news conference.
Spirit shares were up 3.8 percent on Tuesday afternoon at $16.98 after dipping the previous day on expectations of a lawsuit. JetBlue shares were down 0.5 percent at $8.36.
“We believe the DOJ has got it wrong on the law here and misses the point that this merger will create a national low-fare, high-quality competitor to the Big Four carriers which – thanks to their own DOJ-approved mergers – control about 80 percent of the US market,” JetBlue CEO Robin Hayes said in a statement on Tuesday.
“There is too much at stake for the DOJ to prevent us from bringing the JetBlue difference to more customers in more markets,” he added.
The 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.
The 39-page complaint, filed in Boston federal court, said the merger would “combine two especially close and fierce head-to-head competitors”. It called the deal “presumptively illegal”.
The Department of Justice, whose lawsuit was joined by Massachusetts, New York and Washington, DC, also said that JetBlue planned to remove 10 percent to 15 percent of seats from every Spirit plane.
“Fewer seats means 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.
JetBlue has argued that the merger, which would create the fifth-largest US carrier with a market share of 9 percent, was good for competition and would allow it to better compete with the big airlines.
The Department of Transportation said on Tuesday it fully supports the lawsuit and plans to deny an exemption application asking the department to permit the carriers to operate under common ownership prior to the requested transfer.
US Judge Leo Sorokin will hear the case. Sorokin also heard the Department of Justice 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 had previously said it expected the deal for Spirit to close in early 2024, leaving time for litigation if necessary.
JetBlue prevailed in a months-long bidding war for Spirit Airlines after the ultra-low-cost carrier accepted its offer in late July.
From the beginning, JetBlue’s acquisition of Spirit had been expected to face a tough antitrust review because the four biggest carriers – American Airlines, United Airlines, Delta Air Lines and Southwest Airlines – control 80 percent of the US domestic market.
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 percent in both Fort Lauderdale and Orlando airports if the merger is completed.