In a merger that might improve competition at the high end of the US airline sector while eliminating the biggest cheap carrier for vacationers on a tight budget, JetBlue Airways is buying Spirit Airlines for $3.8 billion. The announcement of the deal on Thursday came one day after Spirit Airlines’ effort to merge with competing bargain airline Frontier Airlines failed, capping a bidding war that had started in April.
With around 9% of the market, JetBlue and Spirit would rise to the fifth-largest US airline position. The united airline would leave the rest of the field far behind and go considerably closer to the top – American, United, Delta, and Southwest. The US Justice Department is the last significant barrier standing. The Biden administration’s antitrust authorities have criticised acquisitions, arguing that they harm consumers by stifling competition. To prevent a collaboration between JetBlue and American Airlines, the Justice Department filed a lawsuit.
The two main defences of JetBlue’s request for regulatory permission are as follows: JetBlue claims that due to the size of the combined JetBlue-Spirit airline and its reputation for decreasing fares, it may be able to pressure larger airlines to do the same. Additionally, JetBlue has already offered to forfeit Spirit’s gates and takeoff and landing times at airports in New York and Boston so that they can be used by more competitive low-cost carriers. According to JetBlue CEO Robin Hayes, “the key question here is obviously what can we do in the US to make a more competitive airline market versus the giant, big four airlines.” We think that expanding JetBlue faster than we could otherwise is the most revolutionary and effective thing we can do.