DOJ to Make Closing Arguments in jetBlue-Spirit Merger

DALLAS — The fate of a proposed merger between JetBlue Airways (B6) and Spirit Airlines (NK) hangs in the balance as the DOJ's closing arguments for the case are scheduled for today, December 5.

The case marks the first time an airline merger challenge has gone to court. Over the past four weeks, U.S. District Court Judge William Young has presided over the case in a Boston federal courtroom, during which the chief executives from B6 and NK testified. The judge intends to issue a ruling before the end of the year. If he approves the merger, it would be the first U.S. airline merger since 2016 when Alaska Airlines (AS) acquired Virgin America, beating B6 to the punch.

The Justice Department (DOJ), which filed a lawsuit in March to block the merger, has argued that the combination would harm consumers by eliminating NK, a competitor that puts pressure on other carriers to lower their prices in the same market. B6's attorneys contested this idea by saying that merging the two carriers would benefit travelers by creating a stronger competitor to the four dominant airlines in the domestic market.

Today's closing arguments in Boston come on the heels of AS and Hawaiian Airlines (HA) announcing a US$1.9 billion merger on Sunday. However, unlike the B6-NK proposal, the AS-HA merger is unique in that both airlines will continue to operate under separate brands, though their frequent flyer programs will be combined.

Alaska Airlines is the sixth-largest airline in the US by seats, while HA is the tenth-largest. The Seattle-based airline argues the same as Boston-based B6 when referring to the acquisition of HA—it's about the creation of a stronger competitor against the US Big Four.

jetBlue-Spirit Merger Details

JetBlue had outbid Frontier Airlines last year in an attempt to merge with Spirit. The proposed deal is valued at US$3.8 billion, with B6 offering to buy NK's shares at US$33.50 per share. B6 claims that when factoring in NK's debt, the deal's value would increase to US$7.6 billion, making it the fifth-largest U.S. carrier.

The Biden administration is more assertive in its enforcement of antitrust laws. Attorneys general from six states and the District of Columbia support the suit, while consumer advocates and certain members of Congress argue that the elimination of Spirit would restrict choices for budget-minded travelers. For context, a round-trip ticket from Fort Lauderdale to Tampa to visit my mom costs about the same as having breakfast with her at Cracker Barrel.

As Lori Aratani from The Washington Post points out, the U.S. airline industry has experienced a wave of bankruptcies and mergers, resulting in a reduction in the number of carriers. In 2000, the four largest airlines held around 55% of the domestic market, with about a dozen smaller carriers competing for the rest. Currently, the top four carriers, namely American Airlines (AA), Delta Air Lines (DL), United Airlines (UA), and Southwest Airlines (WN), account for approximately 80% of the market, based on DOJ filings.

Combined, Alaska and Hawaiian would be the fifth largest carriers unless the DOJ approves the B6-NK merger first. Listen to aviation analysts Rohan Anand and Vinay Bhaskara discuss the intricacies of these latest merger and acquisition instances and what they could mean for domestic air travel in the US on the latest episode of The Airways Podcast.

Featured image: N712JB JetBlue Airlines Airbus A320 FLL KFLL combo with Spirit Airlines N672NK A321. Photo: Alexander Schraff/Airways.