An admission by JetBlue that it would raise Spirit airfares could doom their proposed merger.
JetBlue Airways plans to raise airfares on routes flown by Spirit Airlines by as much as 40% if the carriers’ proposed merger goes through, a new report citing company documents found.
The New York-based carrier would raise fares between 24% and 40%, according to a report by Law360 citing documents released as part of a pending court case. The documents were inaccurately redacted, according to the report. The case is a lawsuit brought by travelers seeking to block JetBlue’s $3.6 billion takeover of Spirit, and is separate from the U.S. Department of Justice’s suit to stop the merger.
“There is direct evidence in the form of party admissions that the merger will have anticompetitive effects,” the travelers suing JetBlue claimed.
A spokesperson for JetBlue said of the disclosure: “Private plaintiffs’ counsel failed to properly redact certain information which, taken out of context, creates a completely inaccurate picture of the facts. We are confident that our merger with Spirit will give a much-needed boost to airline competition in the U.S. and result in more low fares and higher-quality service for customers.”
The cost of flights is a touchy subject in the U.S. today. Airfares rose dramatically last year, contributing to historically high levels of inflation. However, since June, the average domestic airfare has fallen back below 2019 levels, according to the latest Consumer Price Index data. Travelers paid an average of $253.35 per ticket in July, or about 6% lower than in 2019.
JetBlue has argued that its proposed merger with Spirit would enhance competition by creating a stronger competitor to the “Big Four” airlines — American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines — that control roughly 80% of the U.S. domestic market. It has also widely touted the so-called “JetBlue Effect,” which it says shows airfares decrease when the airline enters a market.
However, the Justice Department is focused on the fact that the merger would reduce competition by eliminating Spirit from the market. The regulator has argued that the combination would result in higher fares that would negatively affect consumers.
The Justice Department has also not found the competitive remedies offered by JetBlue and Spirit to be enough. U.S. Attorney General Merrick Garland said in March that they was no guarantee of new competition. The airlines have offered to divest all of Spirit’s assets in Boston and New York — JetBlue’s main bases — as well as select gates in Fort Lauderdale where both airlines maintain bases.
“The JetBlue Spirit merger is [dead on arrival],” former JetBlue executive Marty St. George said in a tweet on the Law360 report Thursday. “No way DOJ loses an antitrust case if they really have internal company docs that say this.”
In a separate case brought by the Justice Department against JetBlue’s former alliance with American, a court agreed that the pact reduced competition. The judge noted in their ruling that U.S. antitrust law is focused on the level of competition in a market, for example the number of competitors, and not the relative strength of one competitor versus others. American and JetBlue had argued that by cooperating in the northeast U.S. they were a more formidable competitor to Delta and United, and able to offer consumers more choices than if they competed with each other.
American and JetBlue began unwinding their alliance in July. That move forced the latter to cut its profit outlook for the year by at least a fifth.
The Justice Department’s case against the JetBlue-Spirit merger is scheduled to go to trial in October.
Updated with statement from JetBlue.
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