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The Justice Department on Tuesday sued to block the merger of JetBlue Airways Corp. and Spirit Airlines Inc., saying the plan would eliminate competition and stick travelers with higher fares.
The two airlines last year agreed to combine in a $3.8 billion deal with the aim of creating the fifth-largest airline in the U.S.
JetBlue
JBLU,
and Spirit
SAVE,
have said that combining their operations would boost competition in the domestic airline industry, not hurt it.
“JetBlue’s plan would eliminate the unique competition that Spirit provides — and about half of all ultra-low-cost airline seats in the industry — and leave tens of millions of travelers to face higher fares and fewer options,” the DOJ said in the complaint.
The acquisition would also stop the growth of Spirit, it said. Spirit has doubled the size of its network, and the DOJ said it was expected to continue expanding “at a quick pace.”
“The acquisition stops this future competition before it starts,” and a JetBlue acquisition of Spirit “will have lasting negative impacts on consumers,” the DOJ complaint said.
Robin Hayes, the chief executive of JetBlue, earlier this week told the Wall Street Journal that the Biden administration’s antitrust regulators have seemed intent on stopping the merger from the beginning.
“My sense is they came to the table with their minds made up,” Hayes told the Journal. He said that JetBlue was prepared to contest the DOJ lawsuit in court.
JetBlue stock weaved in and out of gains and losses after the news. The stock has lost 27% in the last 12 months, compared with a decline of about 5% for the S&P 500
SPX,
The U.S. Global Jets exchange-traded fund
JETS,
has gained 19% in the same time span.
JetBlue and Spirit agreed to merge in late July. Ultralow-cost airline Frontier Group Holdings Inc.
ULCC,
had made a bid for Spirit, also an ultralow-cost air carrier, in February. Spirit shareholders delayed the vote four times but ultimately voted down the deal with Frontier.
The airlines had an eye on the booming leisure air-travel market, banking on pent-up demand for domestic and “destination” flights that emerged as pandemic-related travel restrictions ended.
JetBlue came in with its own offer in April and sweetened the deal along the way. Wall Street analysts and proxy advisers flagged the regulatory risk multiple times.
The new JetBlue-Spirit would have a combined base of 77 million customers and a fleet of 458 aircraft, Jetblue has said.
CORRECTION: A MarketWatch news bulletin linked to this story briefly misidentified Spirit as Sprint. This story did not contain that error. The bulletin has been corrected.
