<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=192888919167017&amp;ev=PageView&amp;noscript=1">
Sunday,  May 26 , 2024

Linkedin Pinterest
News / Business

Trial to determine whether JetBlue can buy Spirit, further consolidating industry, comes to a head

By Associated Press
Published: December 5, 2023, 7:50am

BOSTON (AP) — A lawyer for JetBlue Airways said Tuesday that the biggest U.S. airlines are using their size to cement their dominance in a post-pandemic world, making it critical that a federal judge allow JetBlue to buy Spirit Airlines.

The lawyer, Ryan Shores, said JetBlue needs Spirit to be a “viable challenger” to the four airlines that control most of the domestic air-travel market.

“That mandate is even more urgent today,” Shores said during closing arguments in a trial over the U.S. Justice Department’s lawsuit to block JetBlue’s $3.8 billion purchase of Spirit, the nation’s biggest low-fare carrier.

Lawyers for the government were expected to argue that the deal would hurt consumers by eliminating Spirit and its cheaper base fares, leaving fewer options for travelers on a budget. The government sued to block the deal in March.

There is no jury in the trial, which has stretched over several weeks and included testimony by the CEOs of both airlines. No ruling is expected Tuesday from U.S. District Judge William Young.

During the closing arguments, the judge peppered JetBlue and Spirit lawyers with questions. Young, who was nominated for the federal bench by President Ronald Reagan in 1984, asked Shores how long it would take for consumers to see benefits that JetBlue promises the merger will deliver, such as more competition with the bigger airlines.

The trial represents another test for the Biden administration’s fight against consolidation in the airline industry. Earlier this year, the Justice Department won an antitrust lawsuit and broke up a partnership in New York and Boston between JetBlue and American Airlines.

The outcome of the current trial could reshape the field of so-called ultra-low-cost airlines, which charge low fares but tack on more fees than the traditional carriers that dominate the U.S. air-travel market. If Spirit is acquired by JetBlue, Frontier Airlines would become the biggest discount carrier in the U.S.

JetBlue is the nation’s sixth-largest airline by revenue, but it would leapfrog Alaska Airlines into fifth place by buying Spirit.

On Sunday, Alaska announced an acquisition of its own – it struck an agreement to buy Hawaiian Airlines for $1 billion. The Justice Department has not indicated whether it will challenge that deal.

Previous administrations allowed a series of mergers that consolidated the industry to the point where four carriers – American, Delta, United and Southwest – control about 80% of the domestic air-travel market. The Justice Department filed lawsuits to extract concessions in some of those earlier mergers, but JetBlue-Spirit is the first one that has gone to trial.

Spirit agreed to merge with Frontier Airlines, which shares its ultra-low-cost business model, but JetBlue beat Frontier in a bidding war.

Some Wall Street analysts have recently suggested that JetBlue is paying too much for Spirit, which has struggled to recover from the pandemic, and believe it should renegotiate the deal. JetBlue has given no indication that intends to do so, however. If it wins in court, JetBlue will nearly double its fleet, repaint Spirit’s yellow planes and remove some of the seats to make them less cramped, like JetBlue planes.

Shares of both airlines were down about 3% in late-morning trading Tuesday amid a broad market decline that included the travel sector.

Loading...