The US Department of Justice (DOJ) has begun a legal battle to block JetBlue Airways (NASDAQ:JBLU) from its planned $3.8 billion acquisition of low cost carrier Spirit Airlines.
The case, filed in federal court in Boston, is seen as a critical move by President Joe Biden's administration to maintain competitive pricing among budget airlines, securing affordable air travel for American consumers.
DOJ attorney Arianna Markel argued that the merger would result in fewer flights, reduced seating capacity, and higher ticket prices.
JetBlue's internal analysis indicated a projected 30% increase in fares once Spirit, a key competitor on approximately 100 national routes, is removed from the market.
This spike would amount to roughly $1 billion in annual harm to passengers, according to Markel.
JetBlue counters that the case represents an unwarranted challenge to the merger of the nation's sixth and seventh largest airlines, collectively holding less than 8% of the domestic market, which is dominated by four larger airlines. The group has offered concessions to alleviate antitrust concerns, such as selling off Spirit's airport slots and gates in key cities. However, the DOJ has found these measures insufficient to address the harm it predicts would result from the deal.
The trial coincides with JetBlue's disappointing third-quarter results, attributed to air traffic control disruptions and weather-related setbacks. The stock price dropped nearly 17%, reaching its lowest valuation in nearly 12 years.