The Department of Justice is suing to prevent JetBlue from buying Spirit Airlines

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The plan would eliminate the unique competition offered by Spirit — and about half of all ultra-low-cost airline seats in the industry — and leave tens of millions of travelers facing higher fares and fewer choices.

There was no immediate comment from JetBlue and Spirit. The airlines said the merger would increase competition between airlines and benefit air travelers by lowering overall prices in the markets where the deal would allow the combined carrier to expand.

The Wall Street Journal reported that the Justice Department for years worried that past mergers with airlines had reduced competition in the industry. Under the Biden administration, antitrust authorities have generally taken a tough line on corporate mergers and antitrust enforcement.

Robin Hayes, CEO of New York-based JetBlue, said Monday that US antitrust regulators appeared intent on stopping the merger from the start. He said JetBlue is willing to challenge the DOJ’s lawsuit in court.

The lawsuit, filed by the Department of Justice, said average fares on roads historically fell 17% after Spirit began flying them. The DOJ alleged that “cost-conscious” travelers would lose out if the two airlines merged and JetBlue had the power to increase fares.

The lawsuit, filed by the Department of Justice, says JetBlue will modify Spirit planes to eliminate 10% to 15% of capacity, which could also hurt consumers.

JetBlue and Spirit agreed to merge last year in a $3.8 billion deal aimed at creating the fifth-largest airline in the US with an estimated 9% market share, and the combined entity will remain behind the four largest US airlines: American Airlines Group. a company.,

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The Department of Transportation has also reviewed the planned JetBlue-Spirit deal, and could block it, clear it, or approve it with conditions. The Department of Transportation can oppose a merger on public interest grounds and has the power to block airline deals that the agency determines may reduce competition or tend to create a monopoly.

JetBlue targets an upscale flying experience, offering seat back monitors, free in-flight internet, and other perks. A merger with Spirit, which charges bargain wages and tiers on add-on fees, would give JetBlue a larger presence nationwide, compared to its current focus in the Northeast. JetBlue said it plans to strip the seats from Spirit’s relatively cramped planes and repaint the airline’s bright yellow planes.

JetBlue and Spirit told transportation officials in filings related to the deals that the merger would advance US international aviation policy goals and would increase, not hurt, competition in the domestic airline industry. Corporate executives said that turning Spirit’s operations over to JetBlue would create a stronger competitor to four US airlines, which together account for about 80% of the market.

JetBlue and Spirit overlap in up to 11% of routes that do not stop at both. JetBlue has offered to liquidate all of Spirit’s properties in Boston and New York, as well as five airport gates in Fort Lauderdale. JetBlue said the proposed divestitures would allow room for other ultra-low-cost companies to continue growing.

The DOJ previously said that JetBlue’s entry into the market, particularly in the Northeast, is driving down prices. In the lawsuit filed on Tuesday, the government said Spirit’s entry lowers prices further. “Travelers should not have to choose between the two,” the suit said.

The government said JetBlue, like the rest of the airlines, had to respond to Spirit’s low fares by lowering ticket prices — what the Justice Department referred to as the “spirit effect.” JetBlue cited its own “JetBlue effect,” but the government said JetBlue has recognized its own pricing and revenue declines on routes that Spirit competes with.

JetBlue’s deal with Spirit includes an agreement by JetBlue to pay Spirit shareholders $400 million if antitrust authorities prevent that combination, plus another $70 million for the company.

The merger deal was the culmination of an earlier, sometimes brutal, bidding war for Spirit that began in 2022. Before JetBlue’s bid was approved, Spirit struck a deal to merge with rival airline Frontier Group Holdings. a company.

Spirit CEO Ted Christie initially dismissed JetBlue’s advances, warning that antitrust officials could move to block a deal between Spirit and JetBlue, because it would effectively throw out a lower-cost competitor.

On Tuesday, the Justice Department cited Spirit’s previous comments in its complaint, saying the airline had summed up the government’s case: “JetBlue’s purchase of Spirit will have lasting negative effects for consumers.”

JetBlue said at the time that Spirit and Frontier were downplaying the organizational challenges their proposed group would face. JetBlue eventually prevailed over Frontier after committing to a termination fee and boosting a down payment to Spirit shareholders.

Write to Dave Michaels at [email protected] and Andrew Tangel at [email protected]