JetBlue’s merger with Spirit Airlines was blocked by a federal judge on Tuesday, effectively ending the proposed combination. The decision came after Judge William G. Young of U.S. District Court in Massachusetts ruled that the merger would be anti-competitive and in violation of antitrust laws as argued by the U.S. Department of Justice.
This ruling dealt a major blow to JetBlue, which had hoped to absorb Spirit Airlines and eliminate its ultra-low-cost carrier brand. JetBlue had contended that it needed Spirit’s aircraft and crew members in order to expand and compete with larger U.S. carriers. However, the judge’s decision put an end to these plans.
It remains uncertain whether JetBlue plans to appeal the ruling. In a joint statement, both airlines expressed their disagreement with the decision and stated that they would review the court’s ruling and evaluate their next steps. The termination of the Northeast Alliance between JetBlue and American Airlines, another blow to JetBlue’s growth plans, was also mentioned in the statement.
Following the news of the blocked merger, share prices for Spirit Airlines fell significantly while JetBlue’s shares saw a modest increase. This outcome reflects the market’s reaction to the ruling and its implications for both airlines.
Judge Young’s ruling came after a month-long trial that concluded in early December. Throughout the trial, JetBlue had argued that the merger with Spirit would allow it to double in size and effectively compete with the four major U.S. airlines: American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. These four carriers currently control around 80% of the U.S. air travel market.
On the other hand, the U.S. Department of Justice contended that the merger would harm price-sensitive consumers. They argued that Spirit’s elimination from certain routes would lead to increased prices. The DOJ filed a lawsuit in March to block the merger, asserting that it violated antitrust laws.
The DOJ has challenged previous airline mergers, although many were ultimately settled. JetBlue’s lawyers argued that the current landscape of the U.S. airline industry, with four major carriers dominating the market, necessitated mergers for smaller entrants to survive and thrive.
During the trial, both JetBlue and Spirit also argued that other ultra-low-cost carriers, such as Frontier, Allegiant, Avelo, and Breeze, would fill the void left by Spirit’s potential exit from the market. Executives from both airlines testified that Spirit, which has struggled financially due to the impact of the COVID-19 pandemic, could not continue operating in its current form as an ultra-low-cost carrier. This implied that even without the merger, Spirit would not be able to maintain its current market position.
The central question in the trial revolved around whether the potential increase in the lowest fares on certain routes due to Spirit’s exit would be outweighed by the potential to lower average airfares across the broader market by exerting more pressure on the major carriers.
This is not the first time the DOJ has won an antitrust case. Last year, they successfully blocked JetBlue’s Northeast Alliance with American Airlines. However, that case involved one of the major U.S. carriers and occurred while the Spirit merger was still under consideration.
As of now, this is a developing story, and updates are expected to provide further insights into the future plans of both JetBlue and Spirit Airlines.