JetBlue has decided to go on offense instead of just waiting for the Department of Justice’s (DOJ) court case blocking the acquisition of Spirit to play out this fall. With the American partnership behind the airline, the Spirit purchase is JetBlue’s last shot at a strategic move under this management team, and it is acting like that’s the case.
The plan appears to be to tackle the DOJ on two fronts. First, JetBlue is going the legal route to weaken DOJ’s case before it even starts. Second, it is putting forth meaningful commercial changes to help assuage the concerns that have let to the court case.
JetBlue Says DOJ Screwed Itself in NEA Case
On Monday, JetBlue filed a motion in the court saying that DOJ can’t just change positions whenever it feels like it. Specifically, the airline is saying that DOJ said one thing in the fight against the Northeast Alliance (NEA) with JetBlue and something totally different in the fight against the Spirit acquisition.
Just last year, DOJ touted JetBlue as the antidote to the dominance of the legacy airlines (American,
Delta, and United) and persuaded another court in this District that JetBlue is a “maverick”
airline that makes it less likely for airlines to coordinate. United States v. Am. Airlines Grp. Inc.,
No. 1:21-cv-11558-LTS (D. Mass.) (the “NEA Case”). In this case, in an effort to stop the
JetBlue/Spirit merger, DOJ is saying the opposite: the transaction should not be allowed to
proceed because it will facilitate collusion between JetBlue and its airline rivals post-merger.
According to JetBlue, this is completely and totally not allowed thanks to judicial estoppel. I am no lawyer, so I have no idea whether the judge will approve or deny this. But it seems odd to me that you couldn’t take opposing positions in entirely different circumstances.
In the JetBlue/American deal, DOJ said JetBlue was a “maverick” and all that silly bluster. It then said working with American would put JetBlue under American’s thumb and would take away that position JetBlue has a disruptor. Ok, got it.
In the JetBlue/Spirit deal, DOJ says “As JetBlue grows into a more sizable airline that behaves more like the Big Four, it has fewer reasons to continue to compete aggressively with them.”
Why can’t both be true? If JetBlue stays smaller, it is more of a disruptor. This would make JetBlue bigger so it is arguing it will be less of a disruptor. Then again, it seems like a tortured argument for DOJ to say that JetBlue is a disruptor but has to stay small.
Like I said, I’m not a lawyer, so I have no idea which way this will actually go, but JetBlue might as well swing for the fences and try to get a leg up before the trial begins. It is certainly not relying on this entirely to save the airline’s acquisition. No, instead it is going with more divestments to again try to appease to gods.
JetBlue Divvies Up Spirit’s Booty
It was only June when JetBlue announced it would divest all of Spirit’s assets at LaGuardia to Frontier Airlines. The plan is for all 6 gates Spirit uses at the Marine Air Terminal plus 11 daily slot pairs to head on over to Frontier.
Today, Frontier runs almost nothing from LaGuardia with 1x daily to Orlando, 1-2x daily to Atlanta, and 1x daily that swaps between Dallas/Fort Worth in the summer and Miami in the winter. Spirit meanwhile has a slew of cities with 1x daily including Charlotte, DFW, Detroit (3x daily), Fort Lauderdale (4x daily), Houston/IAH, Miami, Myrtle Beach, and Orlando (3x daily).
While I imagine Charlotte and Houston will lose service, Frontier will still provide adequate options to a variety of leisure destinations targeting the leisure traveler. This looks like the best possible divestiture in this situation.
But just this week, JetBlue announced more divestitures, this time to Allegiant. Allegiant will get:
- 2 gates in Boston
- 2 gates in Newark
- 43 takeoff and landing authorizations at Newark (no idea how you have an odd number, if a plane lands, it has to take off again)
- 5 gates in Fort Lauderdale
Let’s start with the good. The Fort Lauderdale deal makes good sense. Allegiant already has an operation there with up to 12x daily flights spread out to up to 27 different destinations at peak times. St Petersburg, Orlando/Sanford, and Punta Gorda are more than twice this size. With the only significant ULCC gone from Fort Lauderdale when JetBlue gobbles up Spirit, Allegiant should have a field day there.
Possibly more importantly, however, this won’t actually require the combined JetBlue/Spirit to reduce operations. There are — not coincidentally, I assume — 5 gates being built in the new Terminal 5 at Fort Lauderdale just for JetBlue. Whether those gates go to Allegiant or 5 gates elsewhere, it’s not something in use today. It just guarantees those new gates will go to a ULCC. Got it.
Boston and Newark are different. Allegiant already flies to both, but it has a very small operation that focuses on small cities. Here’s what the airline has flown over the last year:
And these are not year-round. From Boston, Fort Walton Beach is in the spring and Indianapolis and Norfolk in summer. From Newark, Grand Rapids is only in the summer.
During the peak of the peak, there are a couple markets that stretch to 4x weekly, including Asheville from both. But overall Allegiant just doesn’t do high frequency in these kinds of markets. It’s mostly at 2x weekly with barely more than 2x daily in total at either airport.
Spirit is a completely different airline in these markets. It has no destination that it serves less than 1x daily. From Boston, Fort Lauderdale and Miami are 2x daily while Orlando is 4x daily. From Newark, it’s similar, though Oakland does fly only 4x weekly in off-peak times. Other than that, routes with more than 1x daily are Atlanta, Las Vegas, Los Angeles, Miami, Myrtle Beach, and Phoenix at 2x daily along with Fort Lauderdale at 5x daily and Orlando at 6x daily.
Spirit runs a high frequency operation while Allegiant is very unlikely to do so, even less likely than Frontier. So it’s far from a perfect replacement in large markets… but does it matter?
All JetBlue is really trying to prove here is that it is not going to take a higher percentage of share at the constrained airports where it operates in the northeast. This would presumably satisfy that.
There had been some unconfirmed rumblings about a settlement with DOJ, and maybe that’s what all these moves are meant to achieve. But DOJ has never really cared about these kinds of tactics. It seems to have made up its mind that JetBlue buying Spirit is anticompetitive, and I expect it’ll see this fight through, emboldened by its victory in court over the NEA.