A federal judge from the U.S Department Of Justice [DOJ] has blocked JetBlue Airways from acquiring Spirit Airlines on Tuesday January 16, 2023. This ruling comes after the DOJ Sued to block the merger back in early 2023. The process has not been all smooth sailing for JetBlue who also lost a trial forcing the airline to end their Northeast Alliance with American Airlines.
Takeaways From The Judge’s Ruling
In the DOJ Docket filed after the ruling the U.S government argues that ” the proposed acquisition at bar is “presumptively illegal” because it results in “a merger which produces a firm controlling an undue percentage share of the relevant market, and results in a significant increase in the concentration of firms in that market.”[DOJ Doc 461 Filed 01/16/24 Page 77]. Some relevant markets that come to mind are places like Orlando and Fort Lauderdale which see a strong domestic and international presence by both JetBlue and Spirit.
Another compelling argument made revolved around the price difference between JetBlue and Spirit. The main argument stems around Spirits lower pricing model being raised following JetBlue Airways acquisition. The DOJ argued, “consumers, those who must rely on Spirit, that this merger would harm; the Defendant Airlines, though exceedingly wellrepresented, simply cannot demonstrate that these consumers would avoid harm.” [DOJ Doc 461 Filed 1/16/24 Page 108&109]. Simply put, passengers who financially rely on Spirit’s lower fares would be put at a disadvantage with higher post merger airfares, and would have a lack of affordable alternate airlines.
What This Means For JetBlue And Spirit
The two airlines will operate separately as they have during the merger filings. It is worth noting that JetBlue and Spirit operate a slightly different business model. While JetBlue is a low cost carrier (LCC), they have a different cost structure and offer premium products like Mint lie flat seats. Meanwhile Spirit operates an ultra low cost carrier model (ULCC) offering rock bottom prices and addon fees for just about everything else. Now, the two airlines will officially treck on separately with their two different and unique operating models going forward.