The Justice Department and Department of Transportation are expected to take action as soon as Tuesday to block JetBlue Airways Corp.’s $3.8 billion merger with Spirit Airlines Inc., according to people familiar with the case.
(Bloomberg) — The Justice Department and Department of Transportation are expected to take action as soon as Tuesday to block JetBlue Airways Corp.’s $3.8 billion merger with Spirit Airlines Inc., according to people familiar with the case.
The Justice Department is expected to file an antitrust lawsuit in federal court, alleging that the elimination of Spirit would increase ticket prices and decrease options for travelers, according to the people, who spoke anonymously to discuss an ongoing case. The Department of Transportation is expected to begin a parallel proceeding to block the transfer of Spirit’s airline operating certificate as incompatible with the public interest, the people said.
The move by DOT is largely unprecedented in the modern era; the agency hasn’t used its authority to block the transfer of a certificate, or the formal Federal Aviation Administration approval to operate aircraft and carry passengers, among major airlines since the industry was deregulated in 1978.
The Justice Department’s suit is expected to focus on what it sees as potential harm to flyers, including fewer choices in booking flights and higher prices on all tickets for routes where there is no budget airline. Having an airline like deep-discounter Spirit as an option serves to keep prices lower for all passengers, even those that fly with other carriers, the people said.
The timing of the complaint could slip to Wednesday, they said.
Spirit dropped 5.2% — its steepest drop in more than five months — to $16.89, the lowest level since May 2022, as of 2:07 p.m. in New York. JetBlue was trading up 2%.
The Biden administration has taken a more aggressive approach to mergers with the Justice Department filing a record number of lawsuits last year. For example, last month, the Federal Communications Commission moved to block Standard General LP’s proposed $5.4 billion purchase of broadcaster Tegna Inc., sending the deal to a lengthy administrative hearing that could drag out the review, potentially beyond the companies’ time frame for completion. The FCC reviews radio and broadcast deals to ensure they are consistent with the public interest, a standard broader than the Justice Department’s review of deals.
‘Ensure Competition’
The July 2021 executive order specifically called on DOT and Justice to consult on how to “ensure competition in air transportation and the ability of new entrants to gain access.”
“We believe there is a high likelihood of a complaint from DOJ this week,” JetBlue said in a email. “We have always accounted for that in our timeline to close the transaction in the first half of 2024.”
The carrier said it would “vigorously pursue” a legal challenge to any deviation in how the DOT has treated mergers and certificate transfer applications over the past 30 years.
The airlines met with the Justice Department last month in a final bid to avert a lawsuit by the antitrust agency. The proposed deal would make JetBlue the fifth-largest US carrier based on domestic passenger traffic. The airline hopes to lure passengers away from larger competitors with lower fares and better onboard service.
Deep Discounters
JetBlue also released updated data it said showed that the two carriers compete on a limited basis, that Spirit assets it already has offered to the Justice Department would further reduce that overlap and that rival deep discounters are growing rapidly.
The week’s lawsuit would mark the second against JetBlue by Biden’s antitrust lawyers, who are also seeking to unwind the airline’s alliance in the US Northeast with American Airlines Group Inc. A judge has yet to issue a decision in that case following a trial last year.
–With assistance from Alan Levin and Todd Shields.
(Updates with additional lawsuit details beginning in fourth paragraph, company comment in seventh.)
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