Finally, JetBlue Airways acquired Spirit Airlines for $3.8 billion. However, it must now gain the approval of antitrust authorities.
The New York-based carrier destroyed the cash-and-stock agreement the two bargain airlines had made earlier this year by snatching Spirit away from Frontier Airlines with an all-cash offer. Spirit announced it has agreed to sell itself to JetBlue a few hours after Frontier and Spirit announced they had canceled their merger agreement due to a lack of shareholders support.
According to JetBlue, it anticipates receiving regulatory permission either in the first three months of 2024 or the fourth quarter of 2019. The carriers anticipate that the contract will be finalized in the first half of 2024.
If regulators approve, it would be the end of Spirit, a brand that has come to symbolize the humiliations of budget air travel, when travelers forgo amenities like free refreshments and checked bags in exchange for a low fare.
Will regulators permit an ultra-low-cost airline to transform into JetBlue, which more closely resembles large carriers, during the most intense period of inflation in decades?
Regulators have a high bar. The Justice Department of President Joe Biden has committed to thwarting any transactions that would hurt competition. It filed a lawsuit last year to stop JetBlue’s Northeast partnership with American Airlines. Late September will see the start of the trial.
JetBlue is upbeat. According to the DOJ lawsuit, the agreement between American and JetBlue, which allows them to coordinate itineraries in important airports serving New York and Boston, amounts to “a de facto merger” and suggests that American might surpass JetBlue in market share.
According to JetBlue CEO Robin Hayes, a merged Spirit and JetBlue would rank as the fifth-largest airline in the nation and would be a formidable rival to the major four U.S. airlines: American, Delta, United, and Southwest. These carriers now have about three-quarters of the U.S. market under their hands after more than a decade of consolidation.
Making a truly national, low-cost, high-quality airline to compete with these legacy airlines on a more national scale is the best thing we can do, according to Hayes, to increase industry competition. “We’re able to do that much more swiftly by combining JetBlue and Spirit than we would do alone.”
American steered clear of comment. An inquiry for comments was not immediately answered by the Justice Department.
The Justice Department has approved airline mergers, despite some legal wrangling. For instance, in 2013, after the department filed a lawsuit to block the merger, American Airlines and US Airways received approval at the end of the year.
However, it is likely to necessitate that JetBlue and Spirit sell some of their assets in the process, according to John Lopatka, a law professor at Penn State Law who specializes in antitrust law.
Without it, he claimed, “the public image would be that [the Justice Department] just capitulated.”
Regulators will be looking at prices and certain city combinations, especially in areas where the airlines have significant operations, such as Florida, in the case of both carriers and the Northeast for JetBlue.
Regarding JetBlue and Spirit, Lopatka remarked, “I think they’re up against a lot.” Without certain compromises, I believe there is no possibility they can complete the merger.