A US District Judge has blocked JetBlue’s proposed acquisition of Spirit Airlines in a crushing verdict for the two companies that sent share prices in Spirit tumbling on Tuesday.
Judge William Young said in his 113-page judgement that the acquisition of Spirit would harm consumers who relied on the ultra-low-cost carrier’s basket basement fares to see friends and family.
The verdict marks a major win for the Biden administration’s Department of Justice, which brought the antitrust case against JetBlue in a Boston courthouse last September, fearing that the merger would harm airline consumers and drive up airfares.
JetBlue had fought and won a bitter battle with Frontier Airlines to acquire Spirit in a bid to get its hands on the carrier’s fleet of Airbus A320 series aircraft and assimilate them into its own brand – one which doesn’t promise low fares.
Those expansion plans, as well as the very future of Spirit Airlines, now look to be in serious jeopardy.
“In sum, the Court has made its best attempt, applying the law to the evidence in this case, to predict the future of a dynamic market recovering from the COVID-19 pandemic, in markedly uncertain times,” the judgement reads.
“For the reasons set forth above, therefore, the Court rules that the proposed acquisition violates Section 7 of the Clayton Act.”
“Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you. Why? Because the Clayton Act, a 109-year-old statute requires this result –- a statute that continues to deliver for the American people,” Judge Young concluded.
In a statement, JetBlue said it disagreed with the court’s ruling and would be evaluating its next steps. In a bid to assuage antitrust concerns, the airline noted that it had terminated its ‘Northeast Alliance’ with American Airlines following another DOJ court victory against JetBlue.
The airlines can appeal the verdict and JetBlue says it is already reviewing the judgement. Judge Young also dismissed a request from the US government to bar JetBlue and Spirit from proposing a merger at any point in the future.
“Defendant Airlines and others in the market, in the context of the unique and dynamic market forces of the airline industry, may decide to take another run at a merger at any time,” the verdict explained.
“Of course, while the Court always encourages parties to resolve their differences without judicial intervention, the courthouse doors remain open should the Defendant Airlines decide to try again, and the Government then wishes to prevent such an attempt.”
Cash-strapped Spirit has been keen to find a buyer, but last year, shareholders rejected a takeover bid from fellow ultra-low-cost carrier Frontier in favour of JetBlue’s more generous terms.
I’d argue that Spirit isn’t “that” small. Their fleet size is about the same as Jetblue. They are only about 20% the size of the big 3 US airlines but still bigger than most. I think this merger could have been good for both sides and it might have raised the Spirit base rate but the actual price or net price after fees would have been close in the end.