JetBlue’s $3.8bn bid for rival airline Spirit blocked by US judge

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A US federal judge has blocked JetBlue Airways’ proposed $3.8bn acquisition of Spirit Airlines, in a victory for the Biden administration’s top antitrust enforcer at the Department of Justice.

US authorities and states last year sued to halt the transaction, alleging that it would reduce competition for passenger airlines. Judge William Young on Tuesday ruled in their favour, prohibiting the companies from closing the deal.

“[I]f 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,” Young wrote in his order.

JetBlue was victorious in a bidding war with Frontier Airlines to acquire Spirit in 2022. The deal would have combined two leading low-cost carriers in the US and created the fifth-largest domestic airline with approximately 10 per cent market share.

Shares in Spirit plummeted about 50 per cent after the ruling, while JetBlue shares rose more than 4 per cent.

JetBlue and Spirit said in a statement they disagreed with the ruling and were evaluating their next steps. “We continue to believe that our combination is the best opportunity to increase much needed competition and choice,” they added. The decision came just a week after Joanna Geraghty became JetBlue’s chief executive.

The DoJ did not immediately respond to a request for comment.

The order is a win for the DoJ’s antitrust unit, which has ushered in a tougher enforcement stance under the leadership of Jonathan Kanter. Appointed by President Joe Biden, Kanter believes US business has faced excessively lax antitrust scrutiny for decades and vowed to crack down on anti-competitive conduct across the economy. 

The decision could make it harder to reshape the industry — particularly for lower-cost carriers — which has consolidated rapidly over the past two decades, leaving it dominated by the four big carriers: American Airlines, United Airlines, Delta Air Lines and Southwest Airlines, which together control about 80 per cent of the market. 

Despite the potential for a combined JetBlue and Spirit to place competitive pressure on the big operators, Young found that consumers who “rely on Spirit’s unique, low-price model would likely be harmed” since the two carriers compete directly across the country.

The DoJ alongside US states including Massachusetts and New York argued that the deal would have limited options for customers and pushed up prices.

The airlines, meanwhile, said the tie-up would have increased competition in a sector where organic growth tends to be slow. They had also offered to make divestitures in a bid to win regulatory approval, including JetBlue agreeing to give up assets in areas such as Boston and New York. Spirit had also committed to let go of gates and other facilities in airports including Newark, New Jersey.  

The offers, however, did not sway Young: “Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you.”