US sues to block JetBlue-Spirit merger, saying the union would leave ‘travelers to face higher fares’
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How did we get here?
JetBlue successfully bid for Spirit Airlines over the summer, after Spirit’s board rejected a merger bid from rival ultra-low-cost carrier Frontier.
JetBlue offered $3.8 billion to buy Spirit, in a deal that would create the fifth-largest airline in the country.
According to William McGee, senior fellow for aviation at the American Economic Liberties Project, the merger would give travelers less choice in airlines and would likely lead to higher fares on many routes.
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However, JetBlue insists merging with Spirit will have little effect on fares, and will actually position the airline to better compete with larger carriers in the U.S.
“A combined JetBlue-Spirit will bring together the best of both airlines to create a customer-centric, low-fare alternative to the dominant ‘Big Four’ airlines,” a statement on the airline’s website says.
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What happens next with the JetBlue-Spirit merger?
As the merger moves toward trial, it’s likely that JetBlue will continue campaigning for the deal in an effort to sway public opinion. It already has some strong supporters, including the Association of Flight Attendants, which calls the Spirit deal an “anti-merger, merger.”
“Our union supports this merger because it is the opposite of all of the ‘host of horribles’ we experienced with consolidation in the past decade. The die was cast for concentrated corporate power when mergers were approved in the last decade to create four mega airlines that now control 81% of the market,” AFA said in a statement. “The strong stance this administration has taken on competition and good union jobs set a foundation for a merger proposal with a JetBlue-Spirit combination that attempts to correct past antitrust failures, and instead drives competition to the highest standards for workers and consumers.”
Donna Hitscherich, a member of the finance faculty at Columbia University’s business school and a director of the school’s private equity program, said that logic along the lines of AFA’s position is a common school of thought when it comes to corporate mergers.
“There may be considerations toward making a stronger competitor,” she told USA TODAY. “Maybe you are consolidating to making a stronger competitor to the incumbents.”
However, the DOJ made clear in announcing the civil suit on Tuesday that it will fight to block the deal, which the agency views as anti-consumer.
“After spending many years criticizing consolidation in the airline industry, JetBlue seems to have changed its tune,” Doha Mekki, principal assistant deputy attorney general for the antitrust division said during the press conference. “Rather than compete to win share, JetBlue has chosen to consolidate and cooperate.”
The DOJ also said that a potential combination of JetBlue and Spirit would do the most harm to the most cost-conscious travelers, who would likely face higher fares if the deal goes through.
Contributing: David Koenig, Associated Press
Zach Wichter is a travel reporter based in New York. You can reach him at zwichter@usatoday.com.