Federal Judge Blocks JetBlue-Spirit Airlines Merger

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Facts

  • A federal judge on Tuesday blocked JetBlue Airways' $3.8B proposed acquisition of Spirit Airlines. The ruling sided with the Dept. of Justice (DOJ), which suggested that the deal would hurt competition and consumers.1
  • Judge William G. Young of the US District Court for the District of Massachusetts ruled that the proposed merger would hurt cost-conscious travelers who value Spirit for its low prices. He added that JetBlue would have an incentive to 'abandon its roots as a maverick, low-cost carrier.'2
  • The DOJ, along with several Democratic state attorneys general, argued that the merger between the US' sixth and seventh largest airlines would 'extinguish a vital source of low cost disruption along more than 375 routes' and cause $1B in annual net harm to consumers. However, JetBlue's lawyers said the argument was misguided since both airlines only control less than 8% of the market combined.3
  • JetBlue has been trying to grow and compete with industry leaders such as Delta and United. Last year, a different Massachusetts judge upheld the DOJ’s decision to block a regional partnership between JetBlue and American Airlines in the northeast US. JetBlue worked to reach a deal with Spirit after it agreed to merge with Frontier Airlines.4
  • After rejecting offers from JetBlue for many months, Spirit exited its agreement with Frontier and agreed to join with JetBlue in July 2022. While Judge Young blocked the terms of the merger, he said his ruling didn't prevent the two airlines from 'taking another bite at the apple.'5
  • Spirit’s shares plummeted 47% on Tuesday and fell another 22% on Wednesday, fueling speculation about the airline filing bankruptcy.6

Sources: 1Associated Press, 2New York Times, 3FOX News, 4CNBC (a), 5WCVB and 6CNBC (b).

Narratives

  • Narrative A, as provided by Travel + Leisure. This ruling protects competition and is a massive victory for consumers that will likely save the existence of cheap air travel. Spirit is known for its low prices that allow many more people to travel, and a merger with JetBlue would have disrupted that business model. The government has an obligation to prevent businesses from consolidating and vesting complete power in a handful of industry giants. Young's ruling not only protects cost-conscious consumers but also strengthens antitrust protections against oligopolies.
  • Narrative B, as provided by BNN. While Judge Young and the DOJ may believe that they're sticking up for consumers, the fact is they're only entrenching the power of the top four airlines and facilitating the downfall of Spirit and cheap airlines. Spirit is in serious financial trouble, and it needed JetBlue to revive its struggling business. Instead of allowing JetBlue to save Spirit, the government blocked a necessary merger, causing the airline's share price to plummet dramatically. Instead of saving cheap air travel, the DOJ has pushed it to the brink of viability.

Predictions