This week the U.S. Justice Department (DOJ) sued to halt JetBlue Airways’ acquisition of Spirit Airlines, but JetBlue will continue to follow the path it had planned with the new airline on board.
- CEO Robin Hayes anticipated that the $3.8 billion acquisition would catch the attention of the DOJ.
- Hayes plans to fight the lawsuit, arguing that larger rivals have conducted similar deals with little pushback in recent decades.
- However, while the deal with Spirit would accelerate JetBlue’s plans, Hayes says the company’s overall plans will be undeterred even if the deal doesn’t go through.
- A merger with Spirit would expand JetBlue’s current fleet and give it access to smaller airports.
- If successful, the combined companies would establish the fifth-largest U.S. carrier, though JetBlue would remain much smaller than major airlines like United and Delta.
- However, if the deal falls through, Hayes says that JetBlue will continue its plans to grow, albeit much more slowly.
Why it’s news
If JetBlue’s merger is successful, it could become a more competitive discount airline. Currently, it ranks number six on the list of the largest U.S. carriers ranked by domestic passenger traffic. American Airlines, United Airlines, Delta, and Southwest lead the way. JetBlue is just behind Alaska Airlines and a little ahead of Spirit.
Customers could also see a difference in ticket prices. When JetBlue announced the merger last summer, the company claimed that more flight options would drive down overall ticket prices. The “JetBlue effect” has also shown that the airline’s presence can somewhat drive down the prices of larger airlines.
Even while facing opposition from the U.S. government, Hayes is relatively unworried by the obstacles.
“If the merger doesn’t happen, we’ll go back to our organic growth plan. The opportunity with the Spirit merger is really just to accelerate that, but it’s not a change in strategy,” Hayes told Fortune.
The DOJ has argued that the merger will reduce airline industry competition and drive up consumer prices.
“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 says in its complaint. “Spirit itself put it simply: ‘A JetBlue acquisition of Spirit will have lasting negative impacts on consumers.’”
The DOJ referenced Spirit’s internal documents that found average fares fell 17% when Spirit planes started flying the route.
Meanwhile, JetBlue argues that the Spirit merger will promote better competition with large airlines.
In a joint statement, JetBlue and Spirit said they will “continue to advance our plan to create a compelling national challenger to the Big Four airlines.”
“We believe the DOJ has got it wrong on the law here and misses the point that this merger will create a national low-fare, high-quality competitor to the Big Four carriers which – thanks to their own DOJ-approved mergers – control about 80% of the U.S. market,” Hayes said.
“Together, we intend to democratize flying for travelers across the country – a goal we believe is worthy of the government’s support,” Spirit CEO Ted Christie said.