JetBlue’s Full-Court Press to Get the Spirit Deal Done

JetBlue

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.

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28 comments on “JetBlue’s Full-Court Press to Get the Spirit Deal Done

  1. JetBlue needs the pilots& planes as said many times here as well as a mid-west hub to knit both coastal services together. This acquisition accomplishes all that & more, but in Detroit there’s a problem & it is called Delta.

    1. Why do people stick with this narrative that JetBlue needs a midcon hub? JetBlue is a point-to-point airline, and does not rely on connections to fill planes. 90% of its pax are local. A midcon hub would necessarily require connections, and B6 does not have the regional fleet to fill those connections. I don’t understand what connections people think B6 is missing that a midcon hub will solve? They serve all of their west coast destinations with nonstop service from JFK and BOS already. It’s extremely expensive to build a hub and it doesn’t fit their business model, nor has the company ever expressed any interest in doing so.

      1. If the merger goes through I think JetBlue could keep some or most of Spirit’s Las Vegas operation, but mid-continent? Don’t see the need.

        1. All the big airlines have at least one & in most cases two.

          AA – DFW/ ORD
          UA – DEN/ IAH/ ORD
          DL – SLC/ MSP/ DTW
          WN – DEN/ MCI/ STL/ MDW/ HOU/ DAL/ BNA

          1. All of those airlines have much different business models than JetBlue. Those hubs rely on connections to create thousands of unique O&Ds. B6 carries mostly local traffic. And doing something because “all the big airlines” are doing it is a terrible business plan.

    2. The mid-con hub is where legacy airlines use regional contractors to fleece small cities and large towns with connection service (see DFW, MSP). Helps to shore up the financial numbers when things get too tough on the coasts (SEA, LAX, NYC), but the coasts are where the O&D is. Jetblue has no ability to run a mid-con hub like that. The other component of a successful mid-con hub is that it must be a large city with its own demand (DFW) or a medium city that is signficantly geographically distant from everywhere else (MSP and DEN). Anything less will not have enough demand to sustain a hub (CLE, CVG, DAY, MCI, PIT, STL). Two cities that are growing enough so each MIGHT have mid-con hub potential are AUS and BNA, but Southwest has BNA covered already and AUS has no space.

  2. You know, now that I think of it; if the DOJ is that concerned about competition being reduced as a result of the B6/NK tie-up, why don’t they move to break up the “Big 3” legacy carriers instead?

    1. And for that matter all the TBTF corporations such as banks, & other quazi monopolies that the DOJ had no problems with getting so large.

      1. Seriously. Exxon and Mobil were allowed to merge with barely a second glance. Same for Chevron and Texaco. Much, much larger companies all. Eyeroll.

        1. Different eras. Until recently both dems and republicans adopted neocon economic gospel which was either reluctant to intervene, or in the pocket of big business, depending on how cynical you are.

          Now that they’re getting tough(er) it seems disingenuous, plus based on comments there apparently are still a lot of people that think the idea of antitrust action is antiquated.

  3. Meanwhile a Jetblue and Alaska tie up still makes much more sense. But we’re now living in a post-factual America in which Stanford and Cal can be members of the ATLANTIC Coast Conference. And that is far from the worst of logical atrocities!

    1. I said that years ago here as well as others & the comeback was something to the point of they have non-compatible fleets & I’m like yeah?

  4. “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)”

    That’s the hidden genius of the plan. All those planes get stuck in Newark, reducing competition and enabling EWR to say “it’s not our fault.”

    1. It’s like a train. You combine them; the flights from Harrisburg and Washington come in as separate planes and go on to Boston as one long plane.

    2. All jokes aside, I assume this is an average across days or whatever periods are being used. For example, 21 takeoffs + 21 landings on Tuesdays, then 22 takeoffs + 22 landings on Wednesdays.

    3. Bill from DC – I believe the discrepancy arises because of the hours of operation for slots. I could be wrong, but if an aircraft arrives during the “slot controlled hours” and departs outside of those hours, it only needs one slot for the two operations. (or vice versa)
      I know nothing about the specific problem in EWR, but I suspect it’s related to this.

  5. JetBlue’s maneuverings continue to illustrate how badly run the carrier is, from paying a huge premium to buy a crappy airline to get its pilots and planes and then spend millions to harmonize, to showing its full cards with a half-baked divestiture plan, to running a lousy, unreliable operation that systematically alienates business travelers. The deal likely won’t go through under the present administration. The future of JetBlue is a subsidiary of American Airlines.

    1. They also continue to make a strong argument for why a Spirit/Frontier merger makes a lot of sense ?

  6. JetBlue, Spirit and Frontier are all fighting for their financial lives and futures and the latest financial updates throughout the industry prove it. Multiple legacy airlines are recording double digit profit margins while several low cost and ultra low cost carriers won’t even be profitable this quarter.

    B6 fails to see – or won’t admit – that the arguments against it by the DOJ in the NEA and merger cases are because of its relationship (or proposed relationship) with carriers both above it and below it in the airline heirarchy – AA is a full service global carrier, B6 is a low cost carrier, and NK is an ultra low cost carrier. The DOJ is logically using different arguments because B6 is in different roles relative to both AA and NK.

    None of the big 4 will be able to acquire or control any other airlines or do any asset transfers. The industry is simply too concentrated.

    B6 is newest among large jet carriers and simply has not succeeded at its core mission of being a premium low cost carrier and is looking to merge its way out of it or partner w/ airlines that will bail it out and those strategies just won’t work. B6 has to fix what is broken w/ itself.

    1. And how exactly are they going to do that without getting to scale and have the resources that can be done just like all the major 4 you mentioned? DL, AA, UA all filed for CH11 to help even merged and cut employee pay. The DOJ is a joke, #5 carrier is the issue but 1,2,3 carriers we’re just going to ignore while they price gouge 80% of the market? These arguments you and many pose are really tiresome. You and many say “They need to fix themselves” yeah but how? They can’t operate efficiently when 75% of your planes get boondoggled in the northeast seeing what a disaster the FAA has been with that sector.
      Also B6 not a LCC anymore, thats just a catchment thats been stuck with them from their early days.

    2. @Tim.

      With all due respect, you stated virtually everything you wrote as fact, but haven’t proven one word of it. We’re all entitled to state our opinions, but none of us are entitled to invent facts. This is why I was wondering if the person who was so complimentary toward Amercan Airlines a couple of weeks ago was really you. You may ultimately be proven right in your speculations/opinions, but no one knows exactly what the future holds. That’s why the SEC put out regulations about “forward looking statements”. In any event, it’s good to have the old Tim Dunn back again. I think.

      1. B6 IS a low cost carrier whether they keep trying to blur the lines between themselves and legacy/global carriers “above” them and ultra low cost carriers “below” them.

        None of the legacy carriers merged or acquired a carrier in a different airline “class” Legacies have always merged w/ legacies.

        The only relevance of AA to this discussion is that AA tried to partner with an LCC in a joint venture that the DOJ got the courts to shoot down.

        The DOJ rightfully notes that there are real competitive concerns when carriers merge w/ carriers in another class.

        and the most anti-consumer merger among the current big 4 was Southwest’s acquisition of AirTran. They overlapped more than any two legacy carriers did in their hubs and WN proceeded to dismantle most of FL’s operation and then raise fares.

        It isn’t anyone’s problem but B6 that their low cost model doesn’t work in the delay prone NE. Legacy carriers make it work – but they spend more money to have backup resources. B6 could do the same thing.

        and the DOT and FAA just extended slot controls until the fall of 2024.

        And QR just applied for a JV with AA.

        Lots to talk about on CF next week.

  7. The offer of EWR allocations is an empty gesture. EWR is a level 2 facility so airlines are not technically required to play ball with the FAA. There is no tangible slot for B6 to transfer to G4. B6 can give away its runway allocations, and continue flying if they choose, just like they did when they blew up EWR during the pandemic. This also demonstrates how poorly B6’s EWR experiment has gone since they seem willing to walk away from much of the growth, and likely retrench back to the EWR markets that can perform: Mint, MCO, FLL, TPA, RSW, PBI, SJU, STI, SDQ.

  8. Then there’s Chicago-ORD………………JetBlue uses Gate G-2 in T3 & Spirit has leases on T3 Gates L5, L7, L9 and L11 for Domestic Arrivals/Departures and International Departures. Spirit International Arrivals operate out of T5/M Gates (Common Use)

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