Will DOJ Block JetBlue-Spirit Merger?
The Department of Justice reportedly will decide by the end of the month whether it will pursue antitrust action against JetBlue.
The Department of Justice is reportedly weighing whether to halt a proposed merger between JetBlue and Spirit Airlines, the nation's largest "ultra-low-cost" carrier and the eighth-largest airline.
In July, JetBlue bought Spirit for $3.8 billion, after Spirit reneged on an earlier plan to merge with Frontier. If the latest merger stands, JetBlue and Spirit would together form the fifth-largest U.S. airline, leaving Frontier as the nation's last major ultra-low-cost carrier.
JetBlue argues its merging with Spirit would be a boon to consumers. A merger-boosting website claims the two airlines would form "a national, customer-centric, low-fare alternative" to the four large legacy airlines and reduce airfare, highlighting a study that found JetBlue's presence in an airport decreases its rivals' average ticket price by about 16 percent, larger than the effect observed with an ultra-low-cost competitor carrier.
Travelers view JetBlue as more of a true substitute for American, Delta, and United than they do carriers like Spirit. In 2015, the American Consumer Satisfaction Index found JetBlue had the highest consumer satisfaction rating among major carriers, while Spirit had the lowest, suggesting a "low cost" airline like JetBlue, which doesn't skimp on service, is more likely to be considered a viable alternative for some legacy passengers than an "ultra-low-cost" carrier like Spirit.
Three years ago, the average inflation-adjusted price for a domestic flight reached $272, the lowest level recorded since Bureau of Transport Statistics records began in 1995. As the pandemic faded, prices slowly approached pre-pandemic levels, though national prices have yet to return to 2019's peak of $413. The proposed merger comes after a quarter in which average national price declined by about 5 percent.
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Whether the DOJ proceeds with antitrust action may hinge on whether it agrees with JetBlue that merging with Spirit would put downward pressure on legacy carrier prices. That will depend on how JetBlue itself sets prices after the merger, the extent to which loyal Spirit riders remain with JetBlue, and the number of Spirit loyalists who defect to another ultra-low-cost carrier, such as Frontier.
JetBlue has previously been accused of engaging in anticompetitive practices. In September 2021, the DOJ brought a lawsuit against American and JetBlue after the airlines had reached an agreement to sell one another's flights in the New York and Boston markets.
The DOJ reportedly will decide by the end of February whether it will seek to block the merger.