39 responses to “The Feds Prepare to Crush the JetBlue Acquisition of Spirit”

1. 

   Cranky Pilot

   Mar 7, 2023

   I disagree with the authors take on this. The DOJ can make whatever case it wants, however the question remains, is this transaction illegal and in violation of antitrust laws? I wish the DOJ luck in making their case. They’re going to need it.

   Reply
   1. 

      SEAN

      Mar 7, 2023

      I agree. The argument being made by the government is at best showing a lack of understanding of business 101 & at worst being outright biased against this merger. In the case of the former the rule of business is to go in when a competitor withdraws or is acquired. In addition, there is enough competition in the ULCC space so that the loss of Spirit gives both Frontier & Allegiant plenty of opportunities to grow into new markets as well as expanding in existing ones. Besides all we here about is how Florida is a bottomless pit of demand… right? So what’s the problem? If it’s FLL, then I must direct you a few miles south where AA has a near monopoly in MIA & no one sees a problem there.

      Reply
   2. 

      vasukiv

      Mar 7, 2023

      That is exactly the point Bret is making. The merger can be found in violation of anti-trust laws if the effect on the consumer is negative. I think the DOJ has a very good case to make given that the biggest ULCC will cease to exist if the merger goes through.

      Reply
      1. 

         CraigTPA

         Mar 7, 2023

         The DOJ will have to prove total all-in cost for the average passenger will go up substantially – yes, Spirit’s top-line fare quotes are cheaper, but not by as much as you might think, and when you consider the average purchase of luggage, etc., the gap between Spirit and JetBlue gets a lot smaller, “ULCC” designation or not.

         The DOJ will also have to consider barriers to entry for potential competitors…but not just slots or gate space. Aircraft availability is also a big limiting factor for new entrants right now, I’d guess a new entrant ordering from Airbus or Boeing would wait years for their first planes.

         Unlike right after deregulation when there were lots of elderly 727/737/DC9/BAC 1-11/F.28s available, the combination of more stringent noise rules and fuel costs makes most used planes impractical for a new start-up, not to mention passenger expectations have risen. The only late-model availability I can think of right now, except for airlines that fail, is Delta’s parked MD-90s, but even then there are likely few, if any, type-rated pilots available and training is expensive.

         (And after Interjet’s experience with the SSJs, I doubt any American airline would think about buying from a company that isn’t Western or Brazilian. Russians are out because of the war anyway, and while somewhere way down the line someone might consider a Chinese product it’s not happening anytime soon.)

         Reply
      2. 

         Joseph Cotler

         Mar 7, 2023

         JetBlue is a horrible airline with a ghetto fleet of aircraft. The data presented by JetBlue must be from the origin days when JetBlue was a great airline.The merger of two shitty airlines would be amazing.

         Reply
      3. 

         Cranky Pilot

         Mar 7, 2023

         There’s nothing stopping Spirit from changing its business model to a more premium product to better compete with the big 4. Spirits presence in ORD and DFW has greatly diminished because of AA and UA dropping their fares to undercut Spirit. They can absorb those losses due to their scale. Spirit cannot compete with the big 4 as it stands now.

         Reply
2. 

   Noah

   Mar 7, 2023

   If JetBlue focuses the narrative only on Florida, they will lose. Fewer seats on planes means higher prices. Fewer airlines on a route means higher prices. The best JetBlue can hope for is to say “what you lose in NYC-South Florida, you gain in other markets and then some.” But hard to really understand why buying Spirit magically allows JetBlue to enter “flyover” cities with no slot or gate restrictions. Sure, more planes means more potential to deploy them, and pilots to fly them, but that’s a weak argument. Adding spirit doesn’t actually make FLL-MEM any more attractive to fly.

   And JetBlue has to go through the contortions to say the big 3 (4 with Southwest) are too big, while also trying to keep working with AA. AA offers JetBlue more high value customers and more high value connecting itineraries, but it certainly is harder for Jetblue’s long term independence.

   As DOJ does their analysis, one thing that is hard to consider is that Spirit may lower fares more than JetBlue, but the way it does so, via unbundled product, means it is also somewhat of an apples to oranges comparison. HHI isn’t a bad metric to use in key markets. But fares alone may not tell the whole story. That is where JetBlue should try to push – the JetBlue experience is loved, the Spirit experience is tolerated. Actual consumer benefit prefer a slightly more expensive JetBlue.

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   1. 

      SEAN

      Mar 7, 2023

      Well then a B6/ AA merger on the same basis would be a non-starter as well.

      Reply
3. 

   John G

   Mar 7, 2023

   My issue with their action is this – do we ONLY value fares when we speak of airline competition? Everyone loves to complain about terrible, cramped seating, long lines, and add-on fees for everything…but that is what happens when all you value is the price.

   I assert that good competition should not just be about the lowest fare, but also about having different options at different service levels for consumers. Some people actually WANT to pay a bit more to be treated better, and in more comfort. Not sure if there is enough of them to make this a good business decision, but that is a different subject. The DOJ is not evaluating that. They just need to evaluate the TOTAL costs and benefits to consumers, not just fares.

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   1. 

      iahphx

      Mar 14, 2023

      I agree. I’ve flown many flights on Frontier the past year due to getting a ridiculous “status match” from them whereby I get all their extra services for free and pay nearly nothing for my tickets. So I’ve seen a lot. And what I’ve generally seen is a poor product that almost nobody would buy a second time. Just the gate experience alone is generally horrific, especially when people get “busted” for having their backback be a bit too large or wanting to carry on a laptop in their hands. The elites will already not buy it — the crowd on a typical ULCC flight is very different from what you’ll see on the traditional airlines — and you don’t really save much money if you buy reasonable services like a carry-on (now going for about $50 each way). I am nearly 100% certain that the USA ULCC model is mostly a niche model for certain very high density leisure/friends&family routes. I question whether it’s otherwise a sustainable business model that customers will want to buy. The DOJ should NOT assume that the Spirits of the world will stay the way they currently operate, or that they offer a product that is actually that valuable to most Americans.

      Reply
4. 

   Tim Dunn

   Mar 7, 2023

   This is one of the best and most balanced approaches to this merger. Congrats, CF. Only a few comments to add.
   1. JBLU continues to believe that it can justify violating one part of US antitrust law because of the “virtues” it adds to the marketplace – and that is simply a flawed understanding of the way the DOJ operates and antitrust law works. JBLU wants to believe that it can justify eliminating a lower cost carrier and removing capacity on every SAVE aircraft as it converts them to JBLU configurations because it will offer more competition to the big 4. It also thinks that what it believes to be a superior level of service can offset less ultra low fare competition. And both of those ideas are incongruent w/ the way airline mergers have ever worked.
   2. JBLU believes essentially that Frontier can be expected to take over the role that SAVE plays as an ultra low fare carrier; F9 is the only carrier large enough and with a business plan that can fully replace what will be eliminated from SAVE – but the US is no better off having the ultra low fare carrier segment consolidated in the hands of fewer competitors.
   3. JBLU has tried to argue that it is being treated differently than what was allowed by the legacies – and yet that is patently false. The primary concern in Florida is the overlap between JBLU and SAVE and esp. in FLL. There is not a single case of two legacy carriers that were #1 and 2 in a major market merging to create one carrier. IN fact, the DOJ did block United/USAir because they had competing hubs in the Washington DC metro. JBLU also argues that legacy carriers have more share in their hubs than JBLU/SAVE would have at FLL and yet they don’t admit that the legacy carriers built those hubs through organic growth that continued to allow competitors to grow in those hubs.
   4. JBLU has offered SAVE’s Boston and NYC assets to be divested and yet that offer has nothing to do with overlap – because SAVE is very small in those markets. The Northeast concessions are simply about trying to hold onto the Northeast Alliance with AA even as it tries to hold onto the merger. The NEA case is still awaiting a judicial decision but is undoubtedly waiting on the DOJ’s decision re: the merger. It is highly doubtful that the NEA will allow the NEA to survive in its present form because it involves antitrust immunity for 2 US companies which combined do have a #1 position in several markets (including S. Florida to the NE where AA and B6 overlap from the Miami/Ft. Lauderdale metro).

   The real issue for JBLU is to figure out what it will be – but it will spend hundreds of millions of dollars trying to defend two initiatives that are simply unlike anything any two US airlines have done and which are bad for consumers.

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5. 

   Anthony

   Mar 7, 2023

   Does the DOJ actually care about ULCC vs legacy, or is market share and capacity the only thing that matters? The conversation around ULCCs always paints them as charities, but they are for-profit companies just like the big bad 4, and they make their money by squeezing passengers too. The Big 4 squeeze passenger wallets, while ULCCs squeeze passenger’s knees. Ultimately, the DOJ should be more concerned with the capacity discipline that will be introduced, rather than any airline’s business model.

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   1. 

      John G

      Mar 7, 2023

      This does beg the question – should the DOJ be concerned with capacity discipline? Part of the problem in air travel right now is that there isn’t ENOUGH capacity, and because demand is so high, all it takes some weather event to strain and then break down the system.

      Reply
   2. 

      Ian L

      Mar 7, 2023

      The thing with ULCCs is that their fares are low enough to induce demand, and ULCCs have gotten better about letting you pay for a non-knee-crushing seat. They’ve even worked with seat manufacturers to eke out a bit more knee room at 28″ pitch, such that I’m fine flying Frontier up front (Stretch seating), and would be fine flying Spirit if they were competitive on time/price on a route I wanted to fly. And the fact that they offer a materially different product than the Big 4 (JetBlue is less different, particularly now that Delta has free WiFi and A220s) is more useful to consumers than, say, AA and UA competing on a route. Or even AA and WN (I may be bitter about them running basically wingtip flights out of AUS as that’s less helpful to consumers than varied schedules).

      Your point about capacity discipline is well taken though. B6 will literally have less seats for sale than NK because their layout is lower-density. Assuming LFs hold constant, even if B6 flew every flight NK does they’d fly fewer people at higher fares. And in many markets it would take a new entrant building up presence to fill in those seats…which would probably be Frontier, because any market that can support Spirit frequencies/plane sizes is too big for G4 or MX or Avelo.

      Reply
6. 

   Ian L

   Mar 7, 2023

   If JetBlue really wants to compete with the Big Four with the Spirit purchase, they can ditch the NEA in exchange, since…well, that’s an alliance with one of the very airlines they say they’ll compete against.

   Taking a non-Florida, non-NE market (AUS), a combined Spirit-JetBlue would, at best, be slightly larger than Alaska (5th largest in 2022), and since spirit is the larger of the two airlines at AUS enough traffic would leak to Southwest or American that the merged JetBlue would wind up where pre-merger Spirit is right now: sixth. Heck, traffic would *have* to leak because there are fewer seats on JetBlue planes than Spirit planes, and AUS is at the razor’s edge of being gate-constrained so it’s tricky to move more capacity there.

   Would I personally pay a premium to fly JetBlue over Spirit? Yep. But basically anywhere Spirit flies from AUS has competition from AA/WN, so B6 would have to do some heavy promotion (rather than bottom-feeding on GDSes) to build up market share (vs. being down 20% from 2021 on pax traffic, I’m sure in part due to NEA switchovers)…which, are they gonna actually do that?

   Yep, NK/F9 still makes sense, and NK/B6 still doesn’t, and I say this as someone who would absolutely fly more on the latter than the former.

   Reply
7. 

   Dartagnan79

   Mar 7, 2023

   I just want to quickly make a comment to Tim Dunn, your comments don’t hold the merit. We know you are deltas little peddler boy. So your input is not really taking up value..
   I’m sorry, cranky, but like most comments on here, you were ignoring, a big fact that Jet Blue is actually offering better service for the public. Like many have said you are just looking at fares, alot the markets that ULCC fly only offer rock-bottom fares cause that’s the only choice they have between getting a cramped Bottom fare service at a legacy fair that they offer in there, tiered ticket prices, or ULCC fare. everyone I know that flies a ULCC won’t fly them again because it’s not worth it at the end of the day with all the à la cart addings it’s really no different than a fare that you would pay on jetBlue or many other airlines. The market can fair, much better with an airline, offering something in between a decent fare, may be a little higher than a rock-bottom fare, but also lower than legacy prices and get much better service. You bet your bottom dollar , Jet Blue will make that argument. If the economy is roaring with inflation, going up 8% in the middle class still thriving, a little 8% increase in a price in airline is not going to stunt peoples choices in air travel especially if they have a much better flight experience. There is a study that proves that they challenge the legacy companies better. They are good at making a better product experience from an otherwise generally meager air travel experience. Most people that fly would rather have a much better experience on top of it.
   But let’s really talk about the big elephant in the room here, how is the DOJ making an argument for an airline to merge on “anti-trust monopoly“ when they gonna be a mere distant five, and you’re just gonna turn a blind eye to the big for airlines that control double of the market share after jetblue merges compared to the big 4 which each of them respectively of market share? Are you kidding me? the DOJ is looking more foolish and you’re also ignoring the fact that they’ve also lost well over most of the lawsuits in the past year. It’s clearly political what’s going on and little Jet Blue has to take the brunt of it meanwhile, these protectionist ideas on the major legacy airlines are going to go unscathed? I would also bad for the majors big 4 that if things don’t go that well for Jet Blue they are definitely going to start rattling the DOJ to say well. If we can have it then you gotta start breaking apart the rest of the industry if you really think consolidation is bad, of which they themselves created. It’s a simple as that you can’t have your cake and eat it too. The major legacy airlines have way too much dominance and to block a little guy to try to be in the fifth place is utterly ridiculous.

   Reply
8. 

   Davey

   Mar 7, 2023

   If the Justice Department allowed United and Continental, American and US Air and Delta and Northwest to merge, for the life of me I don’t understand the animosity over JetBlue and Spirit. The assumption that it will decrease competition and result in higher fares in the Northeast and the Northeast/Florida routes is poppycock and both Justice and the DOT should know if if anyone opened a book.

   These routes have competitive since President Jimmy Carter signed the Airline Deregulation Act of 1978. Air Florida, Peoples Express, New York Air (I think) and a host of others have tried their hand at these markets with varying degrees of success. Legacy Eastern Airlines went bankrupt largely because of cost pressure from the ULCCs of their day. The notion that there isn’t and won’t be price-sensitive competition on JetBlue’s routes doesn’t jibe with history.

   And, if Breeze wants to fly non-stop LGA to VRB, bring ’em on. It will save me a 30 mile drive to MLB or a 92 mile drive to MCO!

   Reply
   1. 

      SEAN

      Mar 7, 2023

      If the Justice Department allowed United and Continental, American and US Air and Delta and Northwest to merge, for the life of me I don’t understand the animosity over JetBlue and Spirit. The assumption that it will decrease competition and result in higher fares in the Northeast and the Northeast/Florida routes is poppycock and both Justice and the DOT should know if if anyone opened a book.

      My thoughts exactly. The case is a weak one based on the examples above.

      Reply
9. 

   DesertGhost

   Mar 7, 2023

   The first thing to keep in mind is that the DOJ can’t automatically block a merger. It has to sue. It has to prove its case in a court of law. The questions are if the merger really destroys competition and thereby harms consumers. No one can know that for certain, in my humble opinion. All the DOJ and DOT can look at is the past. And as many prospectuses state, “past performance is no guarantee of future results.”

   Based on Brett’s description, Spirit seems more like Southwest than does Frontier or Allegiant. It appears to operate mostly daily or multiple daily flights between the airports it serves, not 2 to 4 days per week frequencies. As another poster asked – does the DOJ and anti-trust law concern itself with industry/avgeek definitions such as LCC or ULCC? Or does it look at the competitive environment?

   When I served on a murder trail jury, we were instructed to base our verdict only on the evidence presented in that case. I’m not an attorney, but that instruction seems to indicate that judges only look at the specific case at trial. They don’t include outside evidence. If anyone knows for sure if I’m right or wrong about that observation, please correct me. This potential lawsuit is not about the NEA. It’s only about the merger between JetBlue and Spirit. Tim Dunn stated that JetBlue is violating one part of the anti-trust law. Which part is that specifically? I’m merely asking. He could be right for all I know.

   James J. Hill once observed that “(T)oo much competition destroys all competition.” While that statement was probably self-serving, transportation history has shown him to be right. The railroads were overbuilt, and almost half of the track that existed in 1900 is now overgrown by weeds or have been repurposed as hiking trails. The airline industry post 9/11 had “too many airlines chasing too few passengers” to quote one bromide of that time. The result was bankruptcy after bankruptcy. Does the U.S. government really want to return to those times? Chapter 11 is a form of government sponsored bail out. And I’ve seen a lot of whining about the Covid-related “bail outs” the airline industry got.

   Ultimately, the only people who win lawsuits are the lawyers.

   Reply
10. 

    DesertGhost

    Mar 7, 2023

    Looks like the lawsuit has been filed.

    https://www.justice.gov/opa/pr/justice-department-sues-block-jetblue-s-proposed-acquisition-spirit

    Reply
11. 

    Tim Dunn

    Mar 7, 2023

    The notion that anyone that says anything negative about the JBLU/SAVE merger has to be a fan of the big 4 has to be addressed. The merger is based on eliminating a competitor and reducing capacity would be GOOD for competitors – which is precisely why they would support it – if they took a public choice, which they have not. They also know how messy mergers can be so giving the green light for a merger that will likely result in huge obstacles would be in the best interest of the big 4 rather than for JBLU and SAVE to compete separately.

    Many remember that JBLU competed against ALK to win over Virgin America with team Seattle getting the nod – only to dismantle much of the SFO based upstart. Mergers rarely deliver what was promised, esp. in the airline industry. It is also worth considering what would have happened if JBLU had won the right to merge with Virgin America or if JBLU and ALK merged – neither of which are possible, the latter because ALK learned its lesson and is finally returning to a much better financial position.

    JBLU is the carrier that feels it is strategically backed into a corner and was willing to engage in a hostile takeover of SAVE which already had a merger agreement with Frontier. SAVE’s board eventually walked away from the Frontier merger and accepted JBLU’s engagement ring but let’s not forget that there were multiple merger scenarios in the airline industry that could have played out but which did not – largely because of what JBLU did or did not.

    JBLU and its supporters would love to play the victim role and argue that they are not being allowed to do what other carriers have been able to do – but the reality is that there have been multiple other industry mergers that did not raise the antitrust concerns – each because they were structurally very different from JBLU/SAVE and because those other airlines had options, most of which no longer exist. AA and US only had each other left as legacy carriers when it came time to merge; some might argue that other mergers involving either of them might have been better – but the ship sailed on those possibilities when AA/US were the last couple left standing.
    Just because JBLU is the last non-ULCC that is willing to merge doesn’t mean that the merger that they strategically need is best for any other player or the US air travel system.

    Ghost,
    chapter 11 is NOT a government subsidized exercise. It is an exchange of PRIVATE debt for equity and government debts cannot be renegotiated. It is a private sector restructuring of debt and the government through bankruptcy courts only supervises the process.

    Reply
    1. 

       DesertGhost

       Mar 7, 2023

       Tim,

       None of the history you wrote above matters in this case. it will be judged on its own facts and bankruptcy law. The DOJ has to make its case.

       I didn’t write that Chapter 11 is subsidized. I wrote that it’s a de-facto bailout. There’s a difference. Much of the financial and contractual “restructuring” (which is often coerced by the way the bankruptcy court judge supervises the process) often allows debt to be paid off or renegotiated for pennies on the dollar, and the pre-bankruptcy equity holders are usually wiped out completely. To me, that’s a bailout, not a subsidy. But we can quibble about definitions, can’t we?

       Is eliminating a competitor automatically bad? Delta eliminated Northwest as a competitor, but that apparently was okay with you, I guess. Delta also had to file for Chapter 11 protection before so many competitors were ‘eliminated.” I thought perfect airlines didn’t need to file for Chapter 11 protection. Maybe Delta isn’t quite as perfect as you usually allege.

       Reply
12. 

    Eric

    Mar 7, 2023

    The bottom line as I see it is that B6 & NK are not viable companies independently over the medium to long term. Spirit has been running +/- 10% negative margins for over a year and LOST money during a post-pandemic travel boom. B6 about breaks even….barely. The Ace JetBlue is holding is named Senate Majority Charles Schumer who has been their political patron saint since it started. Let’s see if St. Charles is willing to twist arms to push this through.

    Reply
    1. 

       Tim Dunn

       Mar 7, 2023

       good words, Eric.
       It is also worth noting that NY State has joined the US DOJ in opposing the merger even though NY supported the NEA.
       As CF notes, this a different environment and even different administrations – both at the federal and state level – will see things differently.

       The fact that NY and FL, headquarters to both of the merger candidates, oppose the merger and also are on very different ends of the political spectrum both oppose the deal says this isn’t about politics at all

       Reply
13. 

    CF

    Mar 7, 2023

    Two points here…

    1) I don’t block much in the comments section, but if you try to impersonate me and sign your comment “Cranky Flier” it will be immediately deleted (as has already been done in today’s case) and on a second violation, you will be blocked.

    2) Those saying “well, the DOJ was fine with all the bigger mergers, so this shouldn’t be an issue,” you have to remember that the DOJ that let those mergers happen is not the same DOJ that exists today. Under this administration, good chance none of those mergers would have gone through. This is a very anti-merger administration, so it’s not like consistency matters when you’re talking about a completely different organization at the top.

    Reply
14. 

    TDF

    Mar 7, 2023

    Would not fly Spirit no time no way but would I like a mid major full service airline to use when I dont want to spend on Delta or United? Yes. Could said airline be successful?

    Reply
15. 

    DesertGhost

    Mar 7, 2023

    A lot is going to depend on the judge. They often have quite a bit of discretion, even though they’re guided by the applicable statutes and legal precedents (not the facts about the ABC/XYZ merger). I’m a bit surprised that the judge in the NEA case still hasn’t issued an opinion. And maybe I’m mistaken to be surprised. I see a lot of people tying the NEA and this merger together. And the DOJ does that in its filing. But it’s possible that the judge won’t look at the NEA, and may not allow any evidence in that case to be presented in this one. As I understand these things (which, again, could be mistaken) the judge has a lot of discretion about what evidence is germane. In the murder trial I served on, the judge was adamant that we not do our own research and simply base our verdict on the evidence that was presented in court. I realize a murder trial is different than an anti-trust lawsuit, but I’m pretty sure the fundamental laws and procedures about evidence still apply.

    Reply
16. 

    O’Hare Is My Second Home

    Mar 7, 2023

    I am rooting heavily for the DoJ in both instances. I want the NEA destroyed and I want the merger destroyed. Going further, I want to see B6 destroyed. I want NK to survive since its low fares act as a lure for the deves and degens that I don’t want flying with me on my preferred airline (admittedly, sometimes the lure doesn’t work). But B6 needs to be annihilated so thoroughly that there would be a damnatio memoriae applied to it and it would disappear from history. Only the DoJ has the power to do that.

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    1. 

       Dartagnan79

       Mar 7, 2023

       WOW, Ok Mr CEO of (insert legacy airline). Keep flying your ol pal airline while they keep BOHICA you on prices. An avenue that was thwarted by jetblue entering the market in 2000. IE Good for the market. You must like that hazing paddle quite nicely.

       Reply
       1. 

          O’Hare Is My Second Home

          Mar 7, 2023

          Price is irrelevant to me. I care about convenience. B6 is inconvenient to me, being out of Chicago, and, worse, is a product of Noo Yawk. B6 delenda est.

          Reply
          1. 

             CraigTPA

             Mar 8, 2023

             So just because JetBlue isn’t your choice you want them gone so people who do want to choose them can’t fly them? And that they’re from New York. That’s really a pathetic argument. And most people do care about price, including almost all business travelers.

             Actually, it’s not really an argument, more of a childish scream. But you do you.

             Reply
17. 

    Tim Dunn

    Mar 7, 2023

    It is surprising how much some people cling to the notion that legacy carriers were allowed to merge to eliminate competition in specific markets when the greatest overlap between two carriers that have merged was between Southwest and AirTran, both of which had large operations in multiple cities including Baltimore and Milwaukee. Southwest managed to convince the DOJ that it would bring low fares to more markets and its fares esp. in the AirTran/Southwest overlap markets increased more than across Southwest’s network as a whole. The DOJ was hoodwinked by Southwest about how it would protect consumers in overlap markets. Add in that Southwest has half the number of flights that AirTran had in Atlanta and is much smaller in Ft. Lauderdale and the DOJ can’t really believe that low fare carriers will stick it out any better than legacy carriers. If there is a merger that has convinced the DOJ NOT to believe that low fare carriers had any more of the public’s interest in mind than legacy carriers. And none of the legacy carriers were able to merge with another carrier that had as much share as JBLU/SAVE have in FLL.
    And since the DL/NW was specifically mentioned, it is important to note that merger is the only one of the big 3 that did not require concessions because it was as close to a “perfect” (since someone here likes to throw that word around) end-on-end merger, meaning that the two previous carriers overlapped in virtually no markets other than between their own hubs. DL/NW was also the first of the current big 4 mergers and, other than WN/FL, the DOJ’s opposition and concession demands grew with each subsequent merger.

    Chapter 11 is simply nothing more than a government SUPERVISED process to exchange debt for equity in the reorganized company and the process exists because there is a clear understanding that the LENDERS took the risk and they stand to get more back by restructuring debt than in having the company fold. Notably, Japan Airlines, a non-US company very successfully used the Japanese version of chapter 11. It isn’t exclusively a US process.

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    1. 

       DesertGhost

       Mar 7, 2023

       You’re making excuses again. One less competitor is eliminating a competitor no matter how one wants to slice it. In fact, Delta eliminated at least two competitors. It merged with Western Airlines in 1987, remember? Regardless of the semantics, the net effect of Chapter 11 is still tantamount to a bailout. And we (and economists) can argue those semantics endlessly. Hmm… Even a perfect airline had to be bailed out before it eliminated a competitor.

       Reply
18. 

    Bravenav

    Mar 7, 2023

    The DOJ seems to be taking the position that ULCC’s are both a separate industry from legacy carriers (“The deal would eliminate half the ULCC capacity in US”) and part of the larger air travel industry (“Spirit has forced larger airlines…to compete for customers”). If the ULCC environment is a separate industry, then eliminating the largest entity would increase competition among ULCC’s not decrease it. If ULCC’s are simply part of the larger air travel industry, then a larger JetBlue would provide better competition against the larger carriers. Without Spirit, we still have Frontier, Allegiant, Breeze, Avelo, & Sun Country in the ULCC environment.

    The merger could also benifit the flying public by eliminating an airline ranked very low on customer satisfaction surveys while growing one that ranks at or near the top in every category. The President railed against ancillary fees in his SOTU as customer unfriendly, and Spirit has been the absolute king of such fees.

    Reply
19. 

    LaxLgbSnaFlyer

    Mar 7, 2023

    The policies of the Agencies (DOJ, FTC) change with the Administration (Republican, Democrat) but the Courts will have the final say on this matter based on both the Law and a decades of its application via Case Law.

    If any of the readers of this blog are Antitrust lawyers, or have worked closely with the Agencies as part of M&A cases I welcome their inputs to this blog.

    I anticipate this case to head toward remedies in city pairs that have too much concentration. The case filing is effective pressure to accomplish this.

    Reply
20. 

    Tim Dunn

    Mar 8, 2023

    There are multiple references in the comments about the “higher quality” product that some people believe that JBLU offers, in part because JBLU itself keeps making statements to that effect.
    The reality, however, is that the DOT measures most of the quantifiable metrics about airline quality including on-time, cancellation rates, baggage handling, overbooking, consumer complaints etc.
    In fact, JBLU ranks dead in the middle of the pack with ultra-low cost carriers including SAVE on most of those metrics while right now the big 3 are all in the top half of the industry.
    In terms of onboard product, JBLU does have more seat space and more amenities than ULCCs but it does not have a product advantage in the industry – one or more of the legacy carriers match some or all of JBLU’s product distinctives.

    And it should once again be noted that neither the DOT or DOJ is against mergers and certainly not among airlines. JBLU is trying to do several things which have not been done by legacy carriers – buying a lower price and cost competitor and having double digit market share in overlap markets with its merger partner. The DOJ’s objection is not to ANY merger that JBLU might engage in but rather to THIS specific one which has features which it has never approved for any other legacy carrier and in fact has denied mergers that have had the same features that JBLU is trying to do.

    Reply
    1. 

       Bravenav

       Mar 8, 2023

       J.D. Power’s North American Airline Satisfaction Study for 2022 (the most recent) found JetBlue rated #1 among First/Business class customers, #1 among Premium Economy customers, and #2 (behind Southwest) among Economy/Basic Economy customers.

       Spirit, among Economy/Basic Economy customers, was below average, ahead of just American, Frontier, and Westjet.

       While J.D. Power has aggregated airlines differently each year, JetBlue has consistently ranked at or near the top (along with Southwest and Delta), while Spirit has consistently ranked at or near the bottom (since Spirit entered survey in 2019).

       Reply
21. 

    Zack Rules

    Mar 8, 2023

    Resisting the temptation to put my name as Really Cranky Flier.

    I think the DOJ’s lawsuit is a ploy to force B6 the negotiating table to give up the NEA which the DOJ does not understand and does not like. If B6 drops NEA and some of NK’s assets and even their own, I think the merger gets the green light, especially if those assets go Frontier. DOJ’s move is as much a political one as a legal one, like a scaled-up Schumer bag fee soundbite, they have to be seen as doing something, even on shaky legal grounds.

    Someone at B6 will eventually figure out that the longer the merger takes, the more it costs, the more concessions they could give etc and they will eventually come to their senses and negotiate a settlement. And who’s to say that AA still wants the NEA only to compete against a supped up FLL?

    Reply
22. 

    Zulu Gio

    Mar 12, 2023

    Definitely not going to increase competition! Spirt and Frontier would have. Just going to join the likes of the big four in their price fixing schemes. They were fined millions for costing consumers over 20 billion from 2011-17. JetBlue will be just another massive airline with the same business model. Hopefully the DOJ does it’s job l, but I’m sure lobbyist and corruption will come to the rescue as it often does.

    Reply

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