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JetBlue blocked from acquiring Spirit Airlines in $3.8B deal

A federal judge on Tuesday blocked JetBlue Airways' $3.8 billion plan to buy ultra-low-cost carrier Spirit Airlines based on an agreement with the Justice Department that the deal would reduce the availability of cheap flights.

of ruling The ruling by U.S. District Judge William Young in Boston marks a victory for the Biden administration in efforts to prevent further concentration in the U.S. airline industry, and is expected to make it more difficult for Alaska Airlines to close a deal to acquire Hawaiian Airlines. There is.

Questions also arise about the future of Spirit. The ultra-low-cost carrier has struggled to turn a profit amid rising operating costs and ongoing supply chain problems.

Spirit shares were down 52% on Tuesday afternoon, while JetBlue shares were up 2.5%.

Companies may still appeal the ruling. JetBlue said it is reviewing the court's decision. The Justice Department did not respond to requests for comment.

JetBlue and Spirit have agreed to merge in 2022. Reuters

Young said the proposed merger “would do violence to the core principle of antitrust law: protecting U.S. markets and their market participants from anticompetitive harm.”

Young also wrote that “consumers who rely on Spirit's unique low-cost model are likely to be harmed.”

But he said the injunction “applies only to the proposed JetBlue-Spirit merger as it stands.”

The judge, who questioned at trial whether further asset sales would enable the deal to go through, rejected the Justice Department's request to bar any combination of the two companies.

Spirit was the first domestic U.S. airline to allow passengers to choose features on the tickets they pay for. Getty Images

The Justice Department, along with Democratic attorneys general from six states and the District of Columbia, argued that the JetBlue-Spirit partnership would result in fewer flights and higher fares for millions of Americans.

They argue that allowing JetBlue to absorb its no-frills low-cost airline rival Spirit would “eliminate a significant source of destruction of low-cost competition on more than 375 routes” and reduce consumer costs. It said it would result in net losses of nearly $1 billion annually.

JetBlue's lawyers say the lawsuit is a “misguided” attempt at a merger between the nation's sixth and seventh largest airlines, where the four major carriers collectively control less than 8% of the domestic market. ” He claimed that this was an objection.

The judge agreed with the Justice Department that the combination was anticompetitive. Bumble Di – Stock.adobe.com

Four U.S. airlines (United Airlines, American Airlines, Delta Air Lines, and Southwest Airlines) control 80% of the market after a series of previous airline mergers with the blessing of the federal government.

“This is a huge win for travelers, workers and communities,” said William McGee, senior fellow for aviation and travel at the American Economic Liberties Project.

Spirit was the first domestic U.S. airline to allow passengers to choose what they pay for on their tickets, including checked baggage and food and beverage services. According to the Justice Department, this model encouraged competing airlines to lower prices.

JetBlue is a more expensive airline than Spirit. However, the airline has traditionally maintained a low-cost model compared to major carriers, and has been able to pressure major carriers to lower prices as well when entering new routes.

The New York-based airline sought to address U.S. regulators' concerns by agreeing to sell gates and slots at New York City's main airport. Boston; Newark, New Jersey. and Fort Lauderdale, Florida.

The Justice Department's lawsuit is part of a broader push by the Biden administration to aggressively strengthen antitrust enforcement, an effort that has had mixed results in the courts.

JetBlue was already the focus of one of the earlier lawsuits, with another Boston judge, Leo Sorokin, ruling in May that JetBlue and American Airlines' Northeast alliance violated antitrust laws. I sided with the government in the certification.

JetBlue subsequently decided to terminate the partnership. American Airlines is appealing Sorokin's decision.

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