A federal judge on Tuesday blocked JetBlue Airways’, planned $3.8-billion acquisition of ultra-low-cost carrier Spirit Airlines, after agreeing with the U.S. Department of Justice that the deal was anticompetitive and would harm ticket buyers.
JetBlue’s lawyers had called the case a “misguided” challenge to a merger of the nation’s sixth- and seventh- largest airlines, which combined would control 10.2% of a domestic market dominated by four larger airlines.
The ruling, by U.S. District Judge William Young in Boston marked a victory for the White House in its efforts to prevent further concentration of the U.S. airline industry and raises questions about the viability of another recently proposed deal, Alaska Air’s, acquisition of Hawaiian Airlines,.
President Joe Biden, who has made boosting airline competition a top priority, called the ruling “a victory for consumers everywhere who want lower prices and more choices.”
The ruling finding the deal violated U.S. antitrust law also called into question Spirit’s future. The ultra-low-cost carrier has struggled to turn a profit amid a run-up in operating costs and persistent supply chain problems.
Spirit’s shares closed down about 47% on Tuesday after the ruling, while JetBlue shares ended about 5% higher.
Young said that while a combined JetBlue-Spirit would likely place “stronger competitive pressure” on larger carriers that dominate the domestic airline market, “the consumers that rely on Spirit’s unique, low-price model would likely be harmed.”
He said the deal would eliminate Spirit’s low fares and its ability to put pressure on other higher-priced airlines, including JetBlue, to cut prices. Rivals on average cut prices 7% to 11% when Spirit enters a market, he said.
“The government has demonstrated that consumers value Spirit flights as a unique, economical product option,” Young wrote. “The removal of Spirit as an option for consumers, therefore, would constitute a cognizable harm.”
The airlines can appeal the ruling. In a joint statement, JetBlue and Spirit said they were evaluating “next steps as part of the legal process.”
In a note to employees on Tuesday, JetBlue CEO Robin Hayes and chief operating officer Joanna Geraghty added, “One way or another, be assured: JetBlue has a bright future.
“If we need to move forward without Spirit, we will invigorate our standalone organic plan, continuing to fight for more market share and win customers from the big airlines.”