By Zach Cookie
U.S. Department of Justice Lawsuit Delays JetBlue-Spirit Merger
On Tuesday, the United States’ Department of Justice (DOJ) announced that they would launch a lawsuit to block the $3.8 billion JetBlue Airways and Spirit Airlines merger that has been in the works since July 2022. The DOJ also created a lawsuit to block the major merger of American Airlines and US Airways back in 2013, but the two companies ultimately merged after concessions were made.
While that merger consisted of two industry giants, three years later, Alaska Airlines bought Virgin America in 2016, bringing two west coast airlines together. This put Alaska in a strong position to operate out of Los Angeles and San Fransisco. However, once again, the DOJ intervened and required the Seattle-based carrier to scale back its partnership with American.
In the DOJ’s announcement, the main reason for the lawsuit is the proclaimed adverse impact that the merger would create for the budget conscience traveler, customers looking for the lowest fair possible. While JetBlue is considered a low-cost carrier (LCC), Spirit is regarded as an ultra-low-cost carrier (ULCC).
In a statement distributed by the Department, the combination of the two airlines would create fewer flight options for consumers while also raising fare costs due to a reduction in competition. Further concern was mentioned that Frontier Airlines and Spirit are the two heavy hitters in the ULCC market.
With Spirit’s ultra-low-cost model going to the wayside to join JetBlue’s, the Department worries that ultra-low fare offerings would dwindle, hurting many Americans who rely on these fares. JetBlue is taking heat on another front from the DOJ as well, with a current lawsuit filed in an attempt to dismantle the Northeast Alliance, which the Long Island City, N.Y.-based carrier currently has with American. The ruling on that lawsuit is currently being awaited.
Meanwhile, JetBlue and Spirit both argue that a merger would directly rival the Big Four and reduce fares overall for consumers as the newly formed whole would have a greater share in the overall market. JetBlue’s CEO Robin Hayes made a statement that the airline would continue the push for a completed merger and 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.”
In a press release provided by Spirit, the two companies have come to a settlement with the state of Florida for the merger. Fort Lauderdale and Orlando will both see an increase in seat capacity by 50% along with new jobs being created in both markets. Another note that was mentioned is the commitment to serve 50 new routes not currently offered by either airline, showing that large-scale growth is in the plan.
According to data from OAG, a route and market share analysis from August of 2022 showed JetBlue and Spirit operating 474 total routes, both domestically and internationally. However, only 38 of these routes overlap with each other, the majority being international flights out of Fort Lauderdale-Hollywood International Airport.
This limited competition between the two on routes means that if the merger were to be completed, the new combined airline would be operating 436 total routes using the August schedule. Thus, launching the merged airline to control 7.9% of the market, making them the fifth largest airline in terms of seats offered.
However, this number would decline based on information that has been given by JetBlue that aircraft currently operated by Spirit would receive updated cabins. This would result in economy seats seeing a change in pitch of 4 inches to 32 inches being offered.
Customers would see a decrease in the number of seats available on a given route currently held by Spirit from 182 seats on their highest capacity Airbus A320 to 162 seats which are currently installed on JetBlue’s redesigned A320s. Both carriers have aircraft on order, so available seats offered by each airline will continue to increase based on future growth plans.
While Spirit is headquartered in Miramar, Fla., just southwest of Fort Lauderdale-Hollywood International Airport, JetBlue has its headquarters located in Long Island City, N.Y. Both have overlapping bases in Fort Lauderdale and Orlando. While the Miramar-based carrier does operate a large Fort Lauderdale hub, the overall route structure the airline uses is aimed toward being point-to-point. This is evident through routes from outstation to outstation such as Cleveland, Ohio to New Orleans or Hartford, Connecticut to Montego Bay, Jamaica.
Meanwhile, JetBlue tends to operate on the hub and spoke route structure, with most flights originating or ending at one of their five hubs. There are exceptions to this for the New York-based airline, however, the overwhelming majority of routes operated are of the hub and spoke structure.
While both airlines are considered low-cost, fare types and onboard products are vastly different with JetBlue offering the higher fare on average. One of the biggest differences the average passenger sees is free inflight entertainment along with snacks and drinks currently offered by JetBlue.
Spirit does offer these to consumers as well, however at an additional cost which passengers can choose to select or not. JetBlue entered the basic fare market in 2019 offering Blue Basic which is similar to base fares which are offered by Spirit in that customers need to pay for bags and seat assignments prior to 24 hours before departure. However, inflight entertainment along with snacks and beverages are still included in this fare with JetBlue.
