Feds nix JetBlue-Spirit merge as price booster
A federal judge blocked JetBlue Airways’ $3.8 billion bid to acquire Spirit Airlines, which the Justice Department successfully argued would amount to higher prices and fewer options for passengers.
Tuesday’s ruling determined the proposal from the nation’s sixth-largest airline to buy the seventh-largest carrier — which would create the country’s fifth-largest airline — threatened to end healthy competition between discounted carriers.
“Defendant airlines currently compete head-to-head throughout the country, and that competition, particularly Spirit’s downward pressure on prices, benefits all consumers,” the U.S. District Court of Massachusetts decided.
The court acknowledged the deal might put pressure on larger airlines to be more competitive in their pricing, but concluded that “consumers that rely on Spirit’s unique, low-price model would likely be harmed.”
Feds argued the merger would violate the Clayton Act barring acquisitions that significantly lessen competition or stand to create a monopoly.
“Summing it up, if JetBlue were permitted to gobble up Spirit — at least as proposed — it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline,” the court said.
Spirit Airline stock dropped by a whopping 50% after the court’s ruling, while JetBlue’s value saw a small favorable bump.
Both airlines disagreed with the Justice Department’s ruling and are deciding what to do next.
“We continue to believe that our combination is the best opportunity to increase much needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant U.S. carriers,” the companies said in a joint statement shared with the Daily News. “JetBlue’s termination of the Northeast Alliance and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised. We are reviewing the court’s decision and are evaluating our next steps as part of the legal process.”