Court sues to block JetBlue’s purchase of Spirit Airlines

New York (CNN) The US Department of Justice is taking legal action to end JetBlue’s proposed $3.8 billion deal to buy discount carrier Spirit Airlines, the first time in more than 20 years the government is seeking to block a merger of American airlines.

The lawsuit, announced by Attorney General Merrick Garland on Tuesday, comes as no surprise: The Biden administration has argued since taking office that there needs to be greater competition between companies, particularly in the construction industry. air transport, to reduce costs for consumers. Mind (TO SAFEGUARD)with its low base fare business model that charges customers extra for everything, including carry-on baggage, incentivizes major carriers to offer a percentage of their seats at the lowest possible price.

Garland said allowing the merger would significantly hurt consumers, especially those who depend on the low fares available on Spirit.

“If not blocked, the merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers across the country. The Department of Justice is suing to prevent this from happening” , said Garland. “Companies in all industries should understand now that this Justice Department will not hesitate to enforce antitrust laws and protect American consumers.”

But over the past 22 years, the Justice Department has cleared a series of five airline mergers without trial like the one announced on Tuesday. These agreements have transformed nine major American carriers into four… American airlines (AAL), Delta Airlines (DAL), United Airlines (LAU) And South West Airlines (LUV). Between them, the airlines control about 80% of the country’s air traffic.

JetBlue (BLUE) argues the deal would create a new, stronger competitor for these big four airlines and work to lower fares, not raise them. He argues that JetBlue and Spirit primarily compete with other carriers and not with each other, and therefore the combination will not significantly lessen competition. It has offered to cede landing and take-off slots and crowded airport gates to other low-cost start-up carriers, to encourage continued competition.

“The combination of JetBlue and Spirit plus the rapid growth of ultra-low-cost carriers will ensure increased competition and low fares,” a statement from JetBlue said.

He is committed to continuing his merger efforts and hopes to win the lawsuit in time to close his deal with Spirit by the end of the year. But he is pursuing a separate Justice Department lawsuit challenging an alliance he has had with American Airlines for nearly 18 months.

Although Spirit now also supports the deal, it had previously opposed its takeover by JetBlue. He initially agreed to a merger without another ultra low-cost carrier, Frontier Airlines, and he argued that a deal with JetBlue faced too many regulatory challenges to approve because it would raise fares.

It only caved in to the deal with JetBlue when its own shareholders rejected the combination with Frontier in favor of JetBlue’s more lucrative offer.

Garland quoted a statement from Spirit’s board while still fighting the JetBlue deal, when he said: “A court will be very concerned that a JetBlue-Spirit combination will cause an airline to higher cost and higher fare that would eliminate a lower cost, low cost airline and eliminate about half of the low cost capacity in the United States.”

“We agree,” Garland added after reading that quote.

But now the decision on the deal is not in the hands of the Justice Department or two other federal agencies whose approval is also needed before the JetBlue-Spirit combination project can be finalized – the Department of Transportation and the Federal Communications Commission. Instead, the decision will rest with the federal courts hearing the case.

The Justice Department filed the case in federal court in Boston. He was yet to be assigned to a specific judge on Tuesday noon.

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