JetBlue and Spirit Brace for Justice Department lawsuit to block airline merger

“I expect we will be sued by the DOJ this week,” Hayes said in an interview Monday. “My feeling is that they came to the table with their decision made.” He said JetBlue was prepared to challenge a Justice Department lawsuit in court.

A Justice Department spokesperson declined to comment.

JetBlue and Spirit agreed to join forces last year in a $3.8 billion deal to create the fifth-largest airline in the United States. With an estimated market share of 9%, the combined entity would still lag behind the country’s four largest airlines: American Airlines Group Inc.,

United Airlines Holdings Inc.,

Delta Airlines Inc.

and Southwest Airlines Co.

JetBlue aims for a premium flight experience, offering seat screens, free in-flight internet and other perks. As part of its deal for Spirit, which charges premium fares and layers on fees for extras, JetBlue said it plans to remove seats from Spirit’s relatively cramped planes and repaint the jets’ bright yellow. airline company. The combination would give JetBlue a greater national presence, compared to its current focus in the northeast.

JetBlue said the purchase of Spirit, the Florida-based low-cost airline, represents its best chance to grow enough to credibly challenge the four largest airlines that collectively own 80% of the market.

Mr. Hayes said a Justice Department lawsuit would delay potential benefits from the merger. He and Spirit CEO Ted Christie said in a joint interview Monday that the joined airline would allow them to combine their planes, crews and networks to challenge the dominance of larger airlines in major hubs.

Mr Christie said the deal would also allow Spirit and JetBlue to expand the country’s air transport network by taking over service to small towns that the big carriers have stopped serving and returning the airline’s operations more resistant to weather conditions and other disturbances.

Since closing the deal last July, JetBlue has been trying to convince antitrust authorities that the merger will be good for aviators. Over the past few weeks, the Justice Department has taken depositions related to the deal from airline executives and requested more data, Hayes said. He described the department’s investigations as more of an “investigative process, rather than a real engagement”.

MM. Hayes and Christie explained on Monday why combining the two would ultimately help Airmen. “Hundreds and hundreds of millions of dollars will be saved every year,” Spirit’s Mr. Christie said, referring to what he said was a consumer benefit of the JetBlue-Spirit deal.

Mr Hayes said evidence shows that when JetBlue has entered a market, the overall volume of passenger traffic on certain routes increases while fares drop significantly. According to the airline, the number of passengers on flights between Boston and Atlanta increased by 48% after JetBlue entered the market, while average fares fell by 45%.

Mr Hayes said the ‘JetBlue effect’ was cited by the Justice Department in unrelated legal proceedings. The department is separately suing JetBlue and American over a partnership to sell tickets on each other’s flights at airports in New York and Boston, alleging the deal made the two airlines collaborators, rather than competitors. , on major East Coast routes.

In that case, the Justice Department said competitive pressure from JetBlue has historically led to lower prices for customers when the airline enters a market. JetBlue and American argued in the case that their partnership had helped the two airlines compete with more dominant rivals in the region and that fares had not increased as a result.

Mr Hayes said he largely agreed with what he said were the Justice Department’s concerns about a lack of competition among US airlines currently, a landscape made possible by years of consolidation among smaller airlines.

“We’ve been talking about the lack of competitiveness in our industry for several years now,” Hayes said. “This combination is the cure for that.”

The planned agreement between JetBlue and Spirit has won the support of the Association of Flight Attendants-CWA. Sara Nelson, the union’s president, said in a Feb. 24 letter to U.S. government officials that workers would ultimately benefit from greater competition in what she called “anti-merger, merging”.

In arguing for its deal with Spirit, JetBlue said it was more than three times more effective than Spirit in driving down competitor fares. JetBlue said it and Spirit primarily compete with other carriers.

The two airlines overlap by up to 11% on the nonstop routes they both serve, and JetBlue has offered to divest all of Spirit’s stakes in Boston and New York as well as five airport gates in Fort Lauderdale. JetBlue said the proposed divestments will allow other ultra-low cost quarries to continue their rapid growth.

JetBlue’s deal with Spirit includes an agreement by JetBlue to pay Spirit shareholders a $400 million break fee if antitrust authorities block the combination, plus an additional $70 million to the company.

Write to Andrew Tangel at andrew.tangel@wsj.com