Justice Department set to block JetBlue’s $3.8 billion deal for Spirit Airlines

Federal antitrust authorities are preparing to file a lawsuit seeking to block JetBlue Airways’ proposed acquisition of Spirit Airlines for $3.8 billion.

The deal, announced in July 2022 after JetBlue won a rival bid for Spirit from Frontier Airlines, would create the fifth-largest carrier in the United States.

Lawyers for the US Department of Justice could decide to halt the transaction as early as Tuesday, CBS News confirmed.

A spokesperson for the agency declined to comment.

Robin Hayes, CEO of New York-based JetBlue, said the airline was disappointed, but not surprised, by the government’s potential lawsuit.

“When we got the offer approved by Spirit shareholders last year, we said we didn’t expect to close until the first half of 2024, you know, pending a trial,” he said. said “CBS Mornings” on Tuesday.

JetBlue is expected to fight a Justice Department lawsuit in court.

If the deal goes through, it would be the biggest airline industry merger since Alaska Air bought Virgin America in 2016 for $2.6 billion.

Hayes said the combination of JetBlue and Spirit, a Florida-based discount carrier, would boost competition in the airline industry. In defending the merger, JetBlue said Monday that the two airlines primarily compete with other major carriers, including American Airlines, Delta Air Lines, Southwest Airlines and United Airlines. JetBlue and Spirit overlap on no more than 11% of their respective nonstop routes, according to JetBlue.

How the $3.8 billion Spirit Airlines and JetBlue merger could affect budget travel

The combined airline would have a fleet of about 460 planes and add more than 1,700 daily flights to more than 125 destinations in 30 countries, JetBlue said last year. Together, the companies would hold 9% of the market, compared to 16% to 24% share held by each of the four largest airlines, added JetBlue.

“It’s not Pepsi buying Coke,” Hayes said, adding that “JetBlue and Spirit will together make up 8% or 9%” of the U.S. airline market. “Most people will still fly on the other airlines. That’s where you’re going to save a lot of money – having a bigger JetBlue.”

JetBlue’s purchase of Spirit also faced opposition from other quarters. A coalition of consumers and flight attendants in November filed a lawsuit to end the deal on the grounds that it would let the combined carrier dominate certain routes, according to Bloomberg law.

The Justice Department, along with six states and the District of Columbia, also filed a lawsuit in 2021 to stop JetBlue and American from consolidating operations in Boston and New York, arguing it would hurt competition.

Although the government is expected to challenge the JetBlue-Spirit deal, some Wall Street analysts believe the airlines would prevail in court.

“While we expect the merger to be contested, we do not expect it to be halted, due to the low market shares of JetBlue and Spirit and the entry of new passenger airlines into the market,” Height Securities’ Benjamin Salisbury told investors in a research note. .

Obtaining regulatory clearance to compete in the transaction could require JetBlue to divest some of its operations in New York, Boston and Florida, as well as terminate its codeshare agreement with American, it said. -he adds.

CBS News’ Jeff Pegues and Analisa Novak contributed to this report.

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