On 16 January 2024, the US District Court for the District of Massachusetts blocked JetBlue Airways’ $3.8 billion takeover bid of low-fare carrier Spirit Airlines over competition concerns.
The decision to block the bid, which was ruled as violating antitrust laws by the court, was lauded by Attorney General Merrick B. Garland as a “victory for tens of millions of travellers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward.”
In the court documents, Judge William Young wrote how the growth of Spirit Airlines “posed an increasingly competitive threat to JetBlue [and the ‘Big Four’ airlines]” to the benefit of Spirit’s passengers and other travellers. Its presence, this so-called ‘Spirit Effect’, lowered fares such that “when Spirit enters a market, its rivals reduce their prices between 7% to 11% on average.”
As such, the removal of Spirit Airlines from the market through this merger would wipe away these price benefits for consumers.
Young concluded with this statement: “Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you.”
What now for Spirit Airlines?
Despite this news and the benefits that blocking the merger would bring for consumers, JetBlue argued this merger would create stronger competition to the ‘Big Four’ airlines in the US. But now, this ruling leaves Spirit Airlines in a precarious position. On Tuesday its share price plummeted by 50%, and is dropping ever lower.
This could also spell out difficulties in general for low-fare carriers like JetBlue – who beat out fellow LCC Frontier to bid for Spirit Airlines – to reshape a market that is 80% dominated by American, Delta, United and Southwest.
In its third-quarter results, posted on 31 October, JetBlue posted a net loss of $129 million, with operating revenue down 8.2% year on year. Spirit Airlines, likewise, posted a net income loss of $149.8 million, with a 6.3% decrease in operating revenue.
Image credit: Spirit Airlines
