Biden administration fights JetBlue-Spirit Airlines merger in Boston court
BOSTON - A major business story is playing out in Boston federal court. The Biden Administration is trying to block JetBlue's proposed buyout of Spirit Airlines.
JetBlue wants to buy Spirit for $3.8 billion, saying it needs to grow to compete with bigger airlines. But the federal government says if JetBlue gobbles up low-cost Spirit, there will be less competition and that will hurt consumers.
Spirit is known for rock-bottom fares and the trial could reshape the market for low-cost airlines.
WBZ-TV spoke with CBS News travel editor Peter Greenberg about the case.
"What JetBlue is interested in is not Spirit's routes, it's not Spirit's customers, it's Spirit's planes and Spirit's pilots," he said. "JetBlue's strategy is to become a major player on international flights. They need planes. And if JetBlue wants an AirBus, which is their primary supplier, and says I want 300 planes, they'd have to wait six years."
JetBlue is arguing in court that by growing and stacking up against the major carriers, it can actually bring down airfares. If it swallows Spirit, JetBlue will leapfrog Alaska Airlines but still control less than 10% of the U.S. air-travel market. It would remain far smaller than American, United, Delta or Southwest.
But if JetBlue gets its way, it will grow its fleet about 70%, repaint Spirit's yellow planes and make them less cramped inside.
The Justice Department argues, however, that Spirit is the disruptive force that needs to be protected.
"Consumers are better off with an independent Spirit, not a JetBlue intent on removing seats from planes and charging higher fares," government lawyers argued in their pre-trial brief. They say the harm will fall hardest on cost-conscious consumers.
JetBlue says the vacuum left by Spirit would be filled by growth from other discount airlines. The Justice Department says that is unlikely because all airlines, including the budget carriers, face limits to growth including shortages of planes and pilots.
Spirit, which is based in Miramar, Florida, is known as an "ultra-low-cost carrier," the name given to airlines that tout rock-bottom fares but make up for it by charging high fees for things like checking a bag or carrying one on board. Spirit even charges for soft drinks. Personal-finance site Nerdwallet said passengers should expect to pay $137 in fees on a typical one-way flight, compared with $35 or less at the bigger airlines – including JetBlue.
This isn't the first time that the government has challenged an airline merger. In 2013, regulators sued to stop the merger of American Airlines and US Airways. The deal, which created the world's biggest carrier, went through without a trial, however, after the airlines agreed to give up some gates and takeoff and landing rights at seven major airports.
JetBlue tried that strategy: It offered to divest gates and landing and takeoff rights and gates in Boston, the New York City area and Fort Lauderdale, Florida, to Frontier and Allegiant. The government scoffed at the offer, saying those discount carriers have pledged to fly the same routes that Spirit flies now.
The Biden administration may be having remorse for mergers that the Obama administration allowed to go through and which eliminated Northwest, Continental, US Airways and AirTran as competitors to the four largest U.S. airlines.
The new trial is taking place in the same Boston courthouse where the Justice Department prevailed against JetBlue and American, but the case is being heard by a different judge. It is expected to last until early December.
