US authorities sue to block JetBlue takeover of Spirit airlines

US authorities and states have sued to block JetBlue Airways’ proposed $3.8bn acquisition of Spirit Airlines on the basis that it would reduce competition in the passenger aviation industry.

The US Department of Justice, the District of Columbia and the states of New York and Massachusetts filed an antitrust lawsuit on Tuesday arguing that the deal would “eliminate” competition from Spirit, the fast-growing low-cost carrier, leading to higher prices and fewer options for customers.

The lawsuit comes after JetBlue prevailed in a bidding war with Frontier Airlines to acquire Spirit last July. Spirit and Frontier had previously warned a deal with JetBlue would encounter pushback from competition regulators.

“This acquisition would combine two especially close and fierce head-to-head competitors,” the plaintiffs said in a court filing. “On dozens of routes serving tens of millions of passengers each year, JetBlue and Spirit are two of the most significant rivals today, and they have such large combined market shares that the transaction is presumptively illegal.”

The deal would also stifle growth for Spirit, which had announced expansions into cities prioritised by JetBlue, according to the complaint.

“All that growth will be over before it even has a chance to start,” said Doha Mekki, principal deputy assistant attorney-general at the US justice department’s antitrust unit.

JetBlue and Spirit said they would “continue to advance” their merger plans in spite of the lawsuit.

“Customers deserve a competitive airline marketplace and we will pursue this merger to ensure they get it,” said Robin Hayes, JetBlue chief executive.

JetBlue had offered to divest some Spirit assets, according to media reports. But Mekki said divestitures in airline mergers do not protect competition as they tend to involve items including landing slots, which do not guarantee passenger routes will be preserved.

The combined company would create the fifth-largest US airline and the deal represented the latest consolidation in an industry which has seen a series of megamergers over the past 15 years.

Hayes argued the combination with Spirit would create a new rival to the industry’s traditional “big four” — American, United, Delta and Southwest — and help lower fares by “disrupting” industry pricing.

The four main US carriers and their regional affiliates control 80 per cent of routes in the US, while JetBlue estimated the combination with Spirit would control about 9 per cent of the market.

JetBlue is involved in a separate antitrust lawsuit in which US authorities and states are seeking to block regional operating agreements with American Airlines.

Merrick Garland, US attorney-general, said the JetBlue-Spirit transaction would “exacerbate problems caused by that alliance”, but that the proposed acquisition would have still violated US antitrust laws without the agreement with American Airlines.

The main US airlines were some of the few global carriers to be consistently profitable in the years leading up to the pandemic. Some analysts and executives expect the industry in Europe to follow the US with a series of mergers as the impact of coronavirus fades.

Ryanair chief executive Michael O’Leary is among them and has long predicted the European industry would shrink to a handful of big players.