JetBlue and Spirit Forced to Develop Their Own Strategies After the Merger is Blocked

JetBlue, Mergers/Finance, Spirit

I’ve moved up my usual Thursday post to Wednesday instead… since there was no reason to wait to talk about what just happened yesterday.

It was never easy to predict what the courts would say, but now the guessing games are over. In a 100+ page ruling that used some colorful language, William G Young blocked the acquisition of Spirit by JetBlue. Now, both airlines have some serious work to do. This isn’t great news for Spirit, but it should be good news for JetBlue in the long run if mangement gets serious.

The Ruling

Unlike the JetBlue/American Northeast Alliance (NEA) ruling, this one did not suggest that the airlines really blew their case. In fact, the judge says the airlines were just trying to maximize profits, as they’re supposed to do. He also said expert witness testimony was evenly matched, a far cry from the evisceration of the airline testimony in the NEA case. After quoting Les Misérables at one point and actually evaluating the merits of the case, the judge ended with this:

Spirit is a small airline.
But there are those who love it.
To those dedicated customers of Spirit, this one’s for you.
Because the Clayton Act, a 109-year-old statute requires
this result –- a statute that continues to deliver for the
American people.

Alrighty then.

It was clear where this was going when the judge decided that the “relevant markets” in the case were each origin and destination instead of the broader airline industry at large. JetBlue arguing that this merger would help it compete on the national level with the big carriers was considered a valid concern, but it was also not enough since each individual market had to be evaluated.

Even worse for the airlines, the definition of relevant markets used a very broad net:

The Court accepts as relevant markets the following routes:
nonstop overlap routes that both JetBlue and Spirit currently
fly… “connect routes”, which are the routes on which
both Spirit and JetBlue fly connecting service; “mixed routes”,
which are the routes on which one of the Defendant Airlines
flies direct service and the other provides connective service,
and “Spirit-only routes”, which are routes that Spirit currently
flies, but JetBlue does not.

With that kind of definition, it would be hard to NOT find harm. And so, harm was found. But the judge did also say that the airlines successfully countered many of the concerns. They problem is, they couldn’t completely eliminate them.

Although the Defendant Airlines provide ample evidence at
the rebuttal stage that the anticompetitive harms of the
proposed acquisition will be offset, both by new entries into
the harmed markets and potential pro-competitive benefits, this
evidence fails to establish that the proposed merger would not
substantially lessen competition in at least some of the
relevant markets.

In the end, the real issue is that JetBlue would pull seats out of Spirit airplanes and reduce competition in overlap markets. To replace all of that lost capacity and competition within two to three years, the remaining ultra low cost operators would have to grow at insane and likely impossible rates. It can’t be done, so, the merger is blocked.

First Thoughts

There’s a lot to take in here, but my first observation has nothing to do with JetBlue or Spirit. My first thought was that this was probably good news for Alaska and Hawaiian. Those airlines have much less overlap, and there are no real airport constraints at any of the impacted airports that can’t be addressed. Other airlines could quite easily fill in the void. Using this logic, the Alaska and Hawaiian merger may actually make it through, if the government decides to sue to try to block it. 

But this is not a post about Alaska and Hawaiian. This is about JetBlue and Spirit. We don’t know if JetBlue will appeal, but it wouldn’t surprise me since it does have $470 million on the line here. It was so confident that it would be able to push this merger through that it agreed to pay a reverse termination fee of $470 million if it didn’t make it through anti-trust review. That’s a whole lot of money for nothing, though to be fair, most of it has already been paid out since it promised Spirit shareholders $2.50 a share up front and then 10 cents a month per share starting in January 2023. This is a sunk cost. It’s time to move on.

Assuming JetBlue does move on, what comes next for the two airlines? A whole lot of soul-searching, that’s for sure.

Wakey Wakey Time for Spirit

For Spirit, the airline has been sitting and waiting while the merger went through the courts. It has been relatively stagnant over the last year, even though the airline continues to rack up the losses. Its future survival is in doubt. Helane Becker, analyst with TD Cowen said in her initial note on the ruling yesterday:

We believe Spirit is likely to look for another buyer (maybe private equity?) but a more likely scenario is a Chapter 11 filing, followed by a liquidation.


So, Spirit management needs to wake up fast and start making big changes to put the airline back together again and create a lasting opportunity. Otherwise, JetBlue might be able to just buy those assets in a liquidation. It’ll be a lot cheaper.

JetBlue Needs to Turn Inward

The path for JetBlue isn’t nearly as clear. Robin Hayes departs as CEO in less than a month, so it’s on new CEO (and current President) Joanna Geraghty to figure out where to take this airline.

I haven’t ever viewed the Spirit deal as an actual, useful strategy for JetBlue. Just saying “we need to get bigger so we’re gonna buy an airline with a lot of planes and gates” isn’t a plan. That’s just a delaying tactic. Now, the airline needs to create an actual strategy to fix its many woes. 

JetBlue has to fix the operation. It needs to walk away from bad ideas (like the LAX focus city) and double down on the places it has neglected (Boston). Maybe it should think about getting in on that appeal of the NEA with American. The airline should rethink the European operation, and it should look for new US-based opportunities where it can put a growth plan in place when it has the airplanes.

To make this happen, Joanna needs to bring in some new (or, perhaps… old?) blood to really jump-start this thing. In the end, this should make JetBlue a better airline. It may be smaller, but it makes the airline face its demons now and clean the place up.

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74 comments on “JetBlue and Spirit Forced to Develop Their Own Strategies After the Merger is Blocked

  1. I’m not even remotely like an airline analyst, but the deal never made sense to me at all; this anti-trust response was pretty much inevitable. I just don’t see any way to dance around the fact that JetBlue was going to take a lower-cost competitor off the market, removing access to a product that customers clearly want.

    I have some sympathy for JetBlue wanting to simply buy a bunch of planes, pilots, gates, etc. instead of having to slowly ramp up over years, but sheesh, everybody could have seen this coming from the Feds.

    The Frontier deal made more business sense, more anti-trust sense, and was better for customers that value that type of product.

  2. My first thought is that the judge was naive and also didn’t understand the current state is the industry.

    What good does it do to block a purchase to protect the markets of the smaller airline if that airline goes out of business? Who have you helped here?

    1. This was my thought exactly. The judge claiming that there are people who “love” Spirit… okay first of all, I highly doubt many of those people exist, and even if they do they’re going to be even more disappointed when their airline goes out of business entirely than if it was absorbed into JetBlue.

    2. John – I actually think the opposite it true. He seemed to grasp the state of the industry quite well. Did you read through the ruling? Page 98 has the part where he addresses Spirit’s troubles.

      A defendant asserting the failing firm defense bears the “burden of

      1. Okay Brett I read that section now.

        This guy thinks that Breeze and Avelo are good competition for the legacies and Southwest. If Spirit goes under some other airline will take over their routes.

        Never mind the disruption in service, the jobs lost in the meantime.

        Barriers to entry are a thing. MBA 101.

        You have to be a certain size to compete well as an airline. By killing this, the judge actually made LESS completion in the airline industry.

        A larger and more efficient JetBlue would create stronger competition for the big 4, just as the AS/HA merger would.

    3. DOJ just successfully argued for an outcome of what they claimed would happen if the merger was allowed. Spirit will go belly up and liquidate. Those 1 less ULCC and thus prices rise. If Frontier buys them in bankruptcy, once again one less ULCC and prices increase due to lack of competition.

    1. Nobody really “loves” Spirit, just like nobody dreams of roaming the country via Greyhound, but it fills a necessary niche. At least they have advanced somewhat from their days of looking for as many ways as possible to be actively customer-hostile. Now they are just customer-apathetic instead.

    2. I love (better like) Spirit. Good airplanes, nice service, lots of routes to Colombia… half the price per ticket than Delta from ATL…. with the same rationale lots of other people from Southamerican countries fly Spirit and “love” Spirit.

      1. I kind of wonder just how many repeat customers Spirit gets though. They had a hot start in St. Louis, adding flights before even starting their initial service, but now serve just two routes. Has that experience been related in other markets?

  3. Eh. It’ll be overturned on appeal.

    Just have to jump through a few more hoops and pay off…I mean…argue your case in front of a higher court.

    The merger will almost certainly happen…eventually.

    Have any in recorded history actually been successfully blocked by the feds?

    I know some have been called off. But actually blocked?

  4. Maybe with Breeze in such horrible condition JetBlue can mesh in with them ias a Code share partner and Bring Dave back to right the Ship.

  5. Another thought: if the judge really wanted to push competition, they would have approved it.

    In the airline business size matters. Keeping two small airlines, neither of which is big enough to really affect the legacies? That doesn’t help anyone.

    Just a critical lack of understanding the business and what mergers in the business do.

    If this were AA or DL buying and killing Spirit it would be different. But it’s not.

  6. “The airline should rethink the European operation“

    Really? Are they losing their shirt? I’ve long thought B6 needs to figure out connecting flows, over BOS/JFK in the summer to Europe, over FLL/MCO to the Caribbean and Deep South in the winter.

    To be clear, B6’s current bread and butter is trunk routes on that 200 seat A321, Marty once said that was their most profitable aircraft. But there are only so many places you can drop those. And connecting flows would allow them to make use of useless routes like CLE and ROC and even ORD. (I’m a student of the Scott Kirby connections-are-life school so I can’t help but argue for connections.)

    1. emac – It’s hard to really know how they’re doing on Europe, but I just see it as a distraction. Those European aircraft have only 138 seats, so they don’t add a lot of connections. But JetBlue doesn’t like connections, and it never has, so this is requires a shift in strategy. Also, it will never be that big. Maybe London and Paris work, maybe, and summer can work to places like Dublin and Edinburgh, but then what? You have a big subfleet with a lot of complexity when you could just as easily focus on your core business and send those connecting passengers to your partners over the water.

      1. Not only mention how B6 will soon have three planes with Mint (A321, A321LR, A321XLR) all essentially doing the same thing. By comparison AA will soon only have one (A321XLR).

        Talk about fleet complexities.

      2. I disagree, Europe is doing good enough and with hubs in jfk & bos s huge EU O&D markets it would be quite foolish to not put their brand across the pond. I think they need to either join a alliance team or go into poaching some European airlines like ITA, or air Portugal or condor and do a joint venture like the old nw&klm partnership, and purchase widebodies to fly abroad. The whole codeshare with a foreign airline to connect JetBlue customers from the states barely does anything revenue side, it just gives ,ore exposure and access. They are gate constrained in the northeast, they need to upgauge and add lounge and premium offering. They are leaving delta and united and to a lesser extend American take too much premium.

  7. It just shows the success of a merger depends on when the application is filed. JetBlue taking over Spirit isnt that much different to Southwest buying the assets of ATA and dominating MDW airport.

    1. The difference there was ATA went bankrupt first, and WN bought up the remains.

      Seems like the judge here wants that to happen.

  8. What Jetblue needs to do (business model wise) is fairly obvious. Bethunes book “From worst to first” almost seems to be specifically catered for the B6 management team.

    1) Consolidate. Consolidate. Consolidate. Stop flying stupid unprofitable point to point routes in competitive markets (LAS, LAX, MCO come to mind) and consolidate around your hubs.

    Turn BOS, JFK, and FLL into your big 3 hubs, especially Boston Logan where Jetblue had (had) the chance to build up a EWR style fortress hub.

    Don’t bother expanding out of these 3 hubs for a while, and if they do it should be in places that have decent O/D and lack competition. Think CVG or BNA.

    2) Build up the premiumish of Jetblue

    Fleetwide First class and lounges. Self explanatory.

    B6 in Y has a premium hard product. Price like DL not WN.

    3) Strengthen company culture. Think Bethune era CO. Happier employees mean happier customers. Simples

    4) Make the FF program more lucrative

    Self explanatory.

    5) OTP OTP OTP. No one will fly you if you’re constantly late. Their OTP is a sick joke.

    1. The problem with JetBlue consolidating where they are is they are in the area that is most subject to system disruptions.

      One major NE storm and the whole airline is screwed for days.

      They HAVE to diversify out of the NE.

      1. They particularly need to diversify beyond NE-to-Florida, at least until that far-off day when the FAA finally gets its act together in Jacksonville.

        1. Off topic, but given that the ATC Jacksonsville issues have existed for several years now, I’m surprised that the airlines haven’t made enough of a stink to get the politicians in their pockets (especially the FL politicians) to push for a fix.

    2. If anything, that was their strategy – be a Bos/NY/FLL airline. And irrelevant everywhere else. They need to diversify. Their hard product is great, but their reliability sucks. Mostly due to overdependence on JFK, which is an awful airport. Being relevant in a larger footprint should be the goal here.

      1. I have never flown Jet Blue for that reason…….most flying that I do is from California to the Midwest and to take Jet Blue I would have to fly all the way to JFK and backtrack 800-1000 miles. Jet Blue is an airline by New Yorkers for New Yorkers…..they don’t seem interested in doing business anywhere else.

        1. Even in FL, B6 is heavy on the “New York” / “Northeast” areas of FL, which makes sense given JetBlue’s New York & Boston base.

          It’s not an absolute rule, but New Yorkers & Northeasterners tend to favor the Atlantic Coast and MIA/FLL areas of Florida, both in terms of vacation trips and in terms of snowbirds, while Midwesterners skew towards the gulf and places like TPA/SRQ.

    3. Operations are also a mess and need some major changes before the company can support any new business strategies.

      They are too unreliable to lure higher yield business travelers. I’d never fly them out of JFK

    4. “Don’t bother expanding out of these 3 hubs for a while, and if they do it should be in places that have decent O/D and lack competition. Think CVG or BNA.”

      No competition in BNA? How about Southwest and Allegiant? Jet Blue barely has any presence at all at BNA.

  9. I’m just dumbfounded by the extent to which JetBlue has lost its identity over the past decade. They’ve gone from “Legacy service at ULCC prices” to “ULCC service at Legacy prices.”

    1. Is there really that much of a service difference between ULCCs, LCCs, and legacy carriers any more if you’re not in the pointy end of the plane? I’d say not.

      1. Maybe not considering solely hard product on an on-time flight, but throw in IRROPS, not to mention frequent-flyer alliances and lounges, and it is difficult to compare Mr. Mitt Nut’s favorite airline with, say, Frontier or Allegiant.

  10. I haven’t had a chance to read the entire ruling yet, but the upshot seems to be that the judge is placing more emphasis on the consumers who would experience a (possibly short-term) reduction in competition than on US consumers as a whole who would benefit from a combined airline that would compete more effectively than the Domestic Big Four.

    The idea that ANY short-term loss in competition on specific routes would be a merger-killer sets the bar far higher than previous airline mergers/acquisitions faced. This looks like stronger grounds for appeal than JetBlue would have joining the AAppeal of the NEA ruling.

    Should they try to appeal, though? I’m not sure. The NEA and Spirit legal battles have been giant distractions from the core business, which has ongoing operational issues, and the P&W engine issue makes Spirit less attractive as a source of planes than it was when all this started.

  11. My sense is the Big Four are rejoicing at this decision. Which tells you pretty much everything you need to know about whether the merger would have produced a stronger competitor. I mean, does anyone think DL is concerned that Spirit will still be out there? Or JetBlue?

  12. How is this any different than US’ mergers –each time they were in bankruptcy or almost? US/America West and US/AA. In the latter merger, they appealed and the judge accepted concessions.

    1. If I remember correctly, the US/AA merger partners reached a settlement with the DOJ before the case went to trial.

  13. There’s an old saying in sports that the best deals are often the ones **don’t** make. That may be the case here as well.

    1. Yeah, it baffled me that JetBlue didn’t just bow out after getting Frontier to bid up the price. I cannot even imagine how the transition plan would have worked… since they are two completely-different airlines, was the plan to just whittle away at the Spirit fleet (and routes) until the last bright-yellow plane was gone? It’s not like there was any hope a Spirit plane could fly a JetBlue route, since the products are so different.

      Sounds like a complete money-pit, and a really expensive, distracting, way to buy airplanes and pilots.

    1. Nick – It’s always possible, but then you have to contend with the DOJ presumably filing suit again. I imagine there won’t be any merger activity in the space as long as the current administration is in place.

    2. According to Phil LeBeau of CNBC, Frontier overlaps with Spirit more than JetBlue does. It’s always possible that JetBlue could acquire some of Spirit’s aircraft as part of a Chapter 7 liquidation.

      1. To play devil’s advocate here (trying to adopt the mindset of, say, DesertGhost or IAHPHX rather than Tim Dunn) if Robin Hayes, prior to bowing out, purposely bid Jetblue’s assets to such an extreme level that Frontier and its board wouldn’t bite (i.e. doing exactly what Alaska did to it a la Virgin America), thus deliberately planning to not close on SAVE purchase but write off the sunk costs not as a call option on SAVE but a call option hastening SAVE’s descent into bankruptcy, then maybe Mr. Hayes is a genius. Assuming that no one is allowed to acquire SAVE intact, prior to or during bankruptcy, then B6 has just a good a chance as any to pick-and-choose among the slots, routes, gates, jets, and pilots. And, as with Pan Am pilots but NOT TWA pilots that AMR acquired, any unemployed pilots will be stapled to the bottom of the seniority list. Talk about getting buy-in from your existing pilot labor force…

        1. I think that devils advocate scenario gives too much credit, sure JetBlue overpaid, but I don’t think they were trying to not buy Spirit. It just seemed like the thing to do.

          Also, depending on how exactly an acquisition of spirit’s assets is structured, the might not want to staple pilots to the bottom. Honestly, I’m not sure the company cares where those pilots go in a seniority list, but you also don’t want to be known as the airline that screws over pilots in a tight hiring environment like the one we’re in.

  14. I’ve never understood the strategic rationale for this deal. I get the idea behind access to a lot of capacity (planes & people) quickly, but then what? Why is the end consumer in the midwest, south and west coast suddenly going to care about Jet Blue and choose to fly them? JB needs to get back to core of what made them successful and get really strong on those fundamentals. Then consider what else to do for the long term health of the airline.

  15. If there were a whole Spirit’s fleet worth of middle-market travelers out there then you’d think the other guys would have already chased after them. Spirit pursues largely a different traveler than JetBlue. Had the merger gone through they’d have lost a good chunk of those travelers and gone chasing…. whom? That’s a lot of capacity to add to the some-frills market.

    Still boggles my mind that Spirit can be so close to failure while the world’s most valuable airline by market cap is their idol Ryanair. Is it that Europe doesn’t really have a continent-wide network carrier (or 4) since each airline typically hubs only in their home country? But even then Ryanair doesn’t connect, so they are largely pursuing the non-stop passenger anyway.

    1. > If there were a whole Spirit’s fleet worth of middle-market travelers out there then you’d think the other guys would have already chased after them.

      I think you have a fair point actually about B6 being somewhat “stuck in the middle”. I would also argue that the legacy airlines HAVE chased after the pax that the ULCCs target, and that that has really hurt Spirit… (Not that JetBlue hasn’t tried to do it as well, but it doesn’t seem to know if it’s a LCC offering a some hip/premium options, or more like a full service carrier offering a few value options.)

      The “unbundling” of things and Basic Economy fares, for example (especially on airlines that don’t include a rollerboard carryon in the Basic Economy fare- looking at you, United!) seems to have been in large part done as a result of the competitive pressure from Spirit and the other ULCCs. Given a choice between Spirit/Frontier and basic economy on United/Southwest/American/Delta, the latter are usually the better option (based on less tangible things, such as schedule freqs, pitch, etc) if the fares + additional services are at all in the same ballpark, as they frequently are.

  16. Is there a probable scenario under which both airlines would die? That way, if Delta can be taken out, it would rid me of all my most hated airlines.

  17. Aviation assets are global. Any hope that B6 could pick up assets in bankruptcy is naive since they will be competing with airlines around the world. B6 has to fix its operations first of all things

    1. Your comment reads as if you’re asserting that it’s virtually impossible for JetBlue to acquire some of Spirit’s aircraft as part of a liquidation. Obviously, there’s a possibility that JetBlue could acquire some aircraft, but there will be competition for Spirit’s assets in a liquidation. Of course, the world’s only PERFECT airline might be in the market for some relatively inexpensive aircraft. Maybe that’s why you’re so dismissive.

      1. That’s how I’m reading the press release from Atlanta too. The word “any” in the first sentence is ridiculous. JetBlue has the financial resources to buy some of the existing Spirit fleet if it comes to Spirit liquidating. Yes, there will be global competition, but the pilot shortage is global too and I’d imagine that many (if not most) of the Spirit pilots would want to work for a US airline.

        While I agree that JetBlue has a lot of work to do on the operational side, if Spirit’s planes and pilots became available JetBlue would have to get involved.

  18. I’m fascinated by the what if’s leading up to this move. If JetBlue had gotten Virgin America instead of Alaska they could have had all the room to grow out west. Instead Alaska got it and managed to just buy out a competitor and not really add that much.

  19. > Instead Alaska got it and managed to just buy out a competitor and not really add that much.

    Could one also argue similarly about Southwest’s purchase of AirTran? It wasn’t long before the ATL hub took some big cuts.

    I’d be interested in a retrospective analysis of the Alaska / Virgin America merger and of the Southwest / AirTran merger.

    1. To be honest, I think it would be fun to go through the last several mergers and do a retrospective, maybe something like a winners and losers type post. AA/TW, NW/DL, US/HP, etc.

      1. That would be a fun set of retrospectives to engage in. There would be lots of discussions here regarding them, that’s for sure. Just to thumbnail:

        AA/TW: If you thought that AS’s dismantling of anything and everything VX was fast and discombobulating, what AA did to TW made AS look like slackers. How fast did AA dismantle TW’s STL hub due to the fact that ORD was already theirs and “too close”? Short-term thinking leading to long-term disaster, as AA is de-emphasizing ORD and they just gave STL over to WN.

        US/HP: HP won, flat out. They got the management slots, they solidified PHX as a hub. Perfect example of a reverse merger. And it still continues today with the America West mindset at AA.

        WN/FL: WN was a hidden winner in this. WN had very little room to grow in the US. Thanks to the purchase, they found an outlet to the south. There was a marked growth in US/Mexico travel when WN took over FL’s route system there, with CUN being a particular cash cow. And, suddenly, WN had the muscle to challenge AA in the Caribbean. The fact that WN took over my beloved MDW was almost secondary..

        1. ORD was always a much better hub than STL. Hubs live and die on O&D traffic, and ORD has much, much more than STL. The Chicago area has ~3.4x the population of the St. Louis metro area, and that doesn’t even include the Milwaukee area. The St. Louis business community also has far less demand for premium business travel than Chicago: The consultants and finance professionals in the midwest are overwhelmingly in Chicago, not St. Louis.

          You could argue that St. Louis has roughly the same population as Charlotte, but St. Louis is essentially not growing, while Charlotte is one of the fastest-growing metro areas in the country. Choosing a hub is essentially making a macro bet on that region’s economy, and that bet hasn’t been great for St. Louis for the past couple decades.

          If you’re just going to have one mid-country hub, then you’d pick Chicago over St. Louis every time. Detroit and Minneapolis are both significantly better than St. Louis as well.

          1. The short-term thinking problem with this is that AA felt they had to choose one or the other. The infrastructure was there at STL for a full-fledged hub. What they could have done is something they ended up trying with the NEA: establish JFK as a connecting hub while maintaining PHL as their long-haul hub. TWA was already operating trans-Atlantic from STL. AA could have established STL as a long-haul transit hub with shuttle service to ORD (one-hour flight) and DFW (one and a half hours). They could have used STL as an asset. Instead, they threw it away into the waiting arms of WN.

            1. The long-haul O&D traffic is disproportionately in Chicago. Those passengers don’t want to take a shuttle flight to STL for their long-haul flights – they just want to go.

              PHL is in the 7th-largest metro area in the country (>2.2x the population of St. Louis MSA), with a much stronger business traveler base. Even then, it’s not obvious that PHL works that well as a long-haul hub. Do they serve any destinations that aren’t served direct from JFK by AA or a oneworld partner?

        2. To be fair, AA’s STL hub was a victim of the terrorist attacks on 9/11. The TWA acquisition closed pretty close to that event, and if you had to chose one of the two hubs, you’d choose ORD.

          As I recall, AA wanted to operate STL as a reliever hub of sorts for ORD, especially given that ORD’s airfield still an inefficient mess. But the downturn in the aviation industry meant one of the hubs had to go, and that was STL.

      2. Agreed. One option would be a post showing the networks of two airlines pre-merger, soon after the merger, and then every so often afterwards, just to see what changed and what remains, and why.

        If Brett didn’t want to do a look back on one or more of the major mergers as a post, it might work as a podcast conversation with Dave, or as an “Across the Aisle” interview with one of the execs involved in the deal.

        (Not trying to create work for Brett, but I know we’d love to hear his analysis and thoughts.)

        1. Agree with Kilroy on ideas for future posts/podcasts. As I think we saw with the proposed AS/HA merger and his prompt (re-)post of (I think?) “ContraIRy options”, we eagerly await his past & present professional speaking/consulting excerpts.

  20. I think one reason Spirits business model isn’t working like it does in Europe with RyanAir is because many of those European customers are on their government mandated paid vacation. When you get 5+ weeks a year of guaranteed paid vacation, you can book and travel confidently on your leisure trips. Ive met people from Europe who said they go to work and plan their next vacation right away when their vacation is scheduled. Point being, it’s a little more constant,dependable business RyanAir gets while the Spirit customer base is very, very sensitive to economic factors. While I believe there are many other factors, you’re more likely to travel more knowing you’re getting a paid vacation from work whereas in the US people cut back trips way faster if they are more concerned with economic factors – especially a customer base that is stretched thin even in decent times.

    All that being said, I honestly would breath a sigh of relief if I was JetBlue. The time they announced the merger to now, things have drastically changed. The post-COVID travel boom has finally fizzled and we are getting back to more normal industry. They would’ve ended up with a super over leveraged company that they wildly would’ve overpaid to obtain. They aren’t out of the woods yet but are in better shape than Spirit. I honestly think Spirit is going out of business. My heart breaks for the employees but their business model was flawed to begin with – Frontier realized this for themselves and are turning to just turns for their crews/aircraft to save money. If this merger had gone through, I think JetBlue would’ve eventually found themselves in trouble because they have some structural problems (terrible on-time performance last year) and then add all the additional expenses of taking on Spirit with an aviation industry coming off the once in a lifetime post COVID travel boom —- During the travel boom (that wasn’t going to last forever) yeah, I could see how it made sense on paper but now I just don’t.

    1. B6’s ticket to the graveyard was punched when they lost out on VX to AS. Their collective egos can’t stand being a niche airline, which makes them apply a business model that doesn’t work (and for those who say “But what about Mint”?, what’s so special about Mint that you can’t find in any domestic First on a legacy carrier? I get unlimited booze and free wi-fi on UA in domestic First.). Typical Noo Yawkers in that regard. Can’t stand not being special.

      As for NK…oh, they wanted to be Ryanair so badly. Well, here’s the difference: when Michael O’Leary flew to Dallas to learn at the feet of Herb Kelleher, he didn’t just go back and copy every single thing about Southwest and apply it to Ryanair. He had a good sit-down with himself and figured out what would and wouldn’t work in the European environment that was just deregulating. Then he figured out what things Southwest wasn’t doing that would work with Ryanair. Then and only then did he unveil his vision. All NK did was apply a badly-faded photocopy of FR’s methodology. And NK didn’t have an evil genius like O’Leary at the helm to know instinctively what was wrong and had the power to change course tout suite.

      So NK has written the first six chapters of its story. You know what comes next.

  21. While I could type many words on all the legal issues regarding this case, I don’t think this blog is the place for them.

    As this is a revenue management blog, I will comment that this outcome begs the question if either B6 or NK have the right model with regards to Product Offering (Product Mix, Pricing Model) inside their planes:

    B6 is basically Mint plus an Economy Plus type of product via a bundled pricing model, whereas NK is basically Big Seat plus an Economy Basic type of product via an unbundled pricing model.

    Given consumers typically like both Choice and Convenience, perhaps the most Consumer Value AND Shareholder Value is developed by Airlines that fly with MULTIPLE classes of Product (aka Choice) inside the same plane with multiple flights per day (aka Convenience)….which is more what The Big3 do and NOT was WN, Ryan Air, or Spirit do. Does this call into question the entire value proposition (consumer-facing, shareholder-facing) of the LCC and ULCC models?

    Better judgement causes me to not delve into a variety of legal issues that this ruling likely causes…

  22. Any thoughts on whether JetBlue could build up a hub at RDU? Seems like a good fit for them to build up their (much smaller) version of DL/ATL or AA/CLT.

    1. Tory – It’s not the worst place to try, but they quickly pulled back after building up a bit there during the pandemic. Without internal info it’s hard to know, but that is the kind of city that you’d think would be worth looking at.

      1. Thanks Cranky. Looking at RDU’s Wikipedia page, it looks like there is a lot of competitive service from AA, DL, SWA, and even Frontier. Probably a tough market to crack and they can’t sustain the necessary losses to do it (like DL can at SEA and AUS). Now if they joined OW and had a bit more of a cooperative arrangement with AA there (or at least not destructively competitive), then there might be an opening…

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