This shouldn’t come as much of a surprise, but the merger between JetBlue and Spirit is now officially facing regulatory challenges. The Department of Justice (DOJ) has filed a lawsuit to block JetBlue’s takeover of Spirit.
Continue reading: Biden Admin Sues To Block JetBlue & Spirit Merger
Share your questions, experiences, and thoughts below.
It has been a given that the B6-NK merger would be blocked. The difference between the legacy airlines and what B6 proposes to do is that the legacy carriers are all products of mergers between legacy carriers.
B6 wants to acquire and wipe out a lower cost competitor in order to assure B6' survival which is becoming less and less certain because B6 can't compete.
Size relative to the big 4 is NOT the issue as much as B6 would like to argue it is.
And mergers are always done within the political climate of the day. Right now, there is an administration that is hostile to big business and B6 has to figure out how to operate within that reality and not by engaging in tactics which the government can stop - including both the northeast alliance and a proposed merger.
“The most likely outcome is that some concessions will need to be made for the merger to be approved”
I’m happy to be fact checked by regulatory M&A experts, but once the government files suit to block a merger the most likely outcome is the deal doesn’t happen.
“Right now, there is an administration that is hostile to big business…”
LOL!
Reality: “…Right now, there is an administration that gives a shit about consumers and the impact airline mergers have on them…”
never ceases to amaze me that ordinary people who benefit more from government protection than from the result of corporate greed, still defend the latter.
it is like every maga imbecile on social security voting for rick scott, and then believing when told that Democrats killed social security...
nobody said that Biden and the Dems care about consumers.
They hate big business because they can control big companies easier than they can control a whole lot more small businesses.
The Dems are about control and creating dependency and no one should have any illusions that they will act differently.
They will oppose B6/NK just as they oppose the NEA because they would rather harm companies that they cannot control rather than allowing the free market sort it all out.
Tried flying on B6 once. Never again. Tried flying on NK once. Never again. Tried flying on F9 once. Never again. Anything that takes down any or all three of those abominations, I'm in favor of. And it would be delightful to see Noo Yawk get a big kick in the nads by having its "hometown airline" go down.
I’m not sure what commonalities you see between flying Jet Blue vs the others. I’d argue that in terms of coach in-flight experience, there’s no other domestic airline that’s better. Let’s see here - more leg room than most, snacks and drinks on all flights, fully stocked accessible pantry on cross country flights, IFE at every seat, and free wifi on all planes. There another domestic airline that offers all of that in coach?
I flew B6 in economy and found the seating cramped, the service highly over-rated, and I don't use IFE except for the map. So there was nothing that would make me hold back my vomit and use them again. Hey, Noo Yawk, your pizza sucks and so do you.
@Tim Dunn. Your first comment was well reasoned. Your second comment is batshit. I've noticed this pattern before with you. You're an interesting guy -- very knowledgable, with some very persuasive and insightful arguments, and then all of a sudden you go on tilt into fanboyism and conspiracy. Unfortunately the tilt mode calls the objectivity of your reason mode into question, but I try to just filter the good from the bad.
I know it's been suggested by others before but you should probably have your own blog -- it would suit your form. I'm not saying this as any kind of insult; I'd probably read it.
This merger is bad business, on paper, and in practice. JetBlue is overpaying by multiples for Spirit in order to acquire planes and pilots, it has no interest in running Spirit's shitty operation or maintain its business model. JetBlue can't run a good operation. Never could. Flights are always late. The heavy concentration at JFK and BOS makes that worse. The airline has a tiny slice of business travel and skews leisure. The future for JetBlue is a merger into American Airlines.
THIS.
That grocery merger will create a near-monopoly and is absolutely insane.
@Ben “The most likely outcome is that some concessions will need to be made for the merger to be approved”
Nope.
@NID” I’m happy to be fact checked by regulatory M&A experts, but once the government files suit to block a merger the most likely outcome is the deal doesn’t happen.
+1 @NeverInDoubt. It’s been decades since I worked on an antitrust trial brought by the FTC (DOJ and FTC generally handle different industries when it comes to challenging mergers), but you are spot on. The reason that DOJ is filing suit is that it has demanded concessions, JetBlue rejected them, final and best offers were made, and that’s that. JetBlue will most likely walk away and pay a breakup fee OR go to trial. But a settlement is unlikely at this point.
For once I agree with a Tim Dunn analysis. Maybe this is the second time. Legacy mergers were different than this merger, in an antitrust analysis. Ben doesn’t get that.
At this rate, Jetblue needs the merger with Spirit - its business model is centered almost entirely around New York and needs revenue diversification. As to the consumer concerns, my main concerns are 1) the northeast alliance. I do not think Jetblue has a path forward if the Northeast alliance remains. 2) Fort Lauderdale and Orlando Airports. In reality, if divestitures occur at the two airports as mentioned earlier, and the northeast alliance is undone, Jetblue has a path forward.
Very important to Jetblue's arguments is the growth of new entrants in the market. Breeze Airways is already up to a fleet of 27 aircraft. Divestitures will give them a path to greater growth and competition. And while not as significant though still worth mentioning, Avelo is up to a fleet of 15 aircraft and quickly gaining name recognition.
Operational performance is measurable and Spirit is simply running a better operation than JetBlue.
And that isn't lost on federal regulators.
AA and B6 as a merger will never succeed because of the cost difference. B6 can't acquire AA and AA can't even use the assets it has in AA and B6' overlapping markets, let alone what AA could obtain from B6.
The only future that AA and B6 will have is as simple codeshare and, if they choose alliance partners on the very same basis as AA has with AS.
All of the components of the NEA that the DOJ has sued AA and B6 are will not last.
you would make your case far better if you actually debated what you disagree with on an economic basis - politics aside - rather than dismiss someone that something that you don't agree with.
thank you.
There have been so many false equivalencies thrown out to try and support what B6 is doing - whether it is the NEA Or this proposed merger - that anyone with a modicum of airline history and critical thinking skills should be able to see the fallacy.
B6 slowly fell from its position of strategic leadership in large part because its competitors are more nimble than B6 and B6 cannot figure out to reverse its decline other than to engage in legally questionable strategies which is why they are facing more scrutiny of what they are trying to do than any other airline.
As for the suggestion that I have my own blog, I wrote an article for another site about B6 within the past couple weeks. It shouldn't be hard to find.
@Tim Dunn, yes, sure, but wouldn't you as well?
"They hate big business because they can control big companies easier than they can control a whole lot more small businesses."
"The Dems are about control and creating dependency"
"they would rather harm companies that they cannot control."
These are not economic arguments in a debate; they are political opinions. You might believe these statements to be entirely true, but they're not founded on anything other than your own feelings, and certainly not economics. You're claiming that a political party acts from malicious intent, which is an opinion by definition, as it's not verifiable.
It would be like me saying, "Republicans don't care about Americans." Now, I might believe that to be true, but how seriously would you take me? It's purely an opinion, and not one I'd put forth in public as a statement of fact, because it's not an argument.
So, sure, I'll be happy to stick to informed, grounded analysis. What about you?
As a consumer of air travel,and not a shareholder of airline stock, I have never benefited from mergers. I applaud this move by the administration. Competition matters, and the more the better.
So block the merger, jetBlue fails because it isn't viable in its current form, and you have fewer options. And that increases competition how?
it is not the government or the rest of the US' problem to allow any company to engage in patently uncompetitive actions because that company has failed to demonstrate the creativity to come up with pro-competitive and pro-consumer strategies and to successfully execute on them without the incessant intervention of the government.
All B6 has to do is win in the marketplace, something a whole lot of other airlines have managed to do and B6 itself did for years.
Why? Because Walmart/target/costco/amazon/publix/sprouts/traderjoes/farmers markets/takeout isnt enough options?
Any action would have to come from Alaska (current market cap >$6b) and not Jet Blue (current market cap <$3b).
“Not letting big businesses get away with screwing consumers” != “hostile to big business“, sounds like you have a well-worn copy of Atlas Shrugged.
I agree with Tim on this as a completely unbiased source. The dems have this image in American society and they will do everything in their power for control. Tim is right. You guys are wrong and I hope you guys realize this in bed tonight
After all of the government money the big 4 received, they have little chance of gaining any headway.
On paper it might seem like a good idea, but then you'd end up with two airlines completely confined to the coasts, with discordant fleet types, a nightmare for labor integration, and negligible penetration into the MidWest, Texas, or Southeast outside of Florida... all fast-growing markets.
Me: Tim Dunn, you can be so reasonable before suddenly becoming so unreasonable!
Tim Dunn: Make economics-based specific arguments rather than being broadly dismissive!
Me: Here are specific examples of your expressing broad and conspiratorial political opinions rather than making economics based specific arguments! How about you first?
Tim Dunn: (crickets)
(PS this was supposed to be in the relevant and thread below, did not mean to post it top level)
all that really matters is whether the DOJ actually does file suit to block the merger. What you think of anyone that said all along that there are major problems w/ the merger doesn't matter.
The DOJ is willing to do something very unique in the history of the deregulated US airline industry.
The fact that some of us could see the problems months ago while others are trying to attack specific posters shows where the real problems lie.
all that really matters is whether the DOJ actually does file suit to block the merger. What you think of anyone that said all along that there are major problems w/ the merger doesn't matter.
The DOJ is willing to do something very unique in the history of the deregulated US airline industry.
The fact that some of us could see the problems months ago while others are trying to attack specific posters shows where the real problems lie.
Ben,
as much as you would like to think there are concessions that can be made to save the merger, the DOJ is taking such a unique approach in completely blocking a US airline merger that it clearly believes there is no way to make the JBLU/SAVE merger viable.
JBLU's fundamental thesis in buying SAVE is to eliminate a lower fare competitor (something no legacy carrier has done as part of a merger) which raises fares and to eliminate capacity by removing seats from SAVE aircraft.
And then you have to deal w/ their massive overlap in Ft. Lauderdale which has always been a more problematic market than NYC and Boston, where JBLU wanted to make concessions.
You can't "concede" away something to change those realities.
I couldn't agree more with the DoJ's previous lax approach to mergers. In the US, there is much less competition as a result compared to Europe and that's presumably reflected in fare and service quality levels.
Airfares have risen with the 4 main carriers now, but safety, labor peace, and investment in the hard/soft product has all improved. You dont see airlines collapsing anymore, able to pay living wages to their employees, and can purchase new aircraft.
Your argument about how it will "reduce competition" is pretty mute considering your daddy Delta elimated two hubs when it merged with NW. Pulling millions of ASMs out of the system.
And jbu having a majority in FLL is bad, but Delta having absolute pricing power in ATL, MSP, dtw, and SLC is good?
Am not sure why this is descending into a political argument. The airline mergers have not benefited consumers, just created a bunch of too big to fail companies that need gov. bail outs.
Just because they failed to stop past airline mergers does not mean they should let this through. Following that logic means never stopping another merger again.
B6 is an operational mess, and this will make them worse. I also don't buy the need the merger to survive theory. If either B6 or Spirit end up failing, there will be other new airlines that will fill the space, aka capitalism as originally intended.
LOL..."government protection!"
The reason that JetBlue is desperate for pilots is because the government arbitrarily increased the hours requirement by 500 PERCENT!
It's the same reason that Delta just gave its pilots a massive pay increase.
The last time I checked a crappy corporation never threatened me with prosecution if I didn't but their crappy product.
I can't say the same thing for the Feds.
And by the way...Joe voted for a decrease in SS back in 1983.
It seems that many airline pundits and fans tend to conflate costs and fares, in my opinion. In other words, lower costs don't automatically result in lower fares. Businesses tend to charge what the market will bear. Lower costs allow for better margins given exactly the same fares, but fares are rarely exactly the same on a given itinerary, especially after the added charges are added in. As for the "lack of competition" the merger would create at Fort Lauderdale, hasn't anyone considered the competition with American's massive hub in Miami? Maybe the DOJ wants to conveniently ignore that. On a somewhat related note, I wonder what's holding up the ruling on the NEA. Maybe the judge has privately told the parties that they would be better off if they reach a settlement (if that's not considered unethical) - or maybe he's just dragging things out to give them that hint.
I at this point hope it doesn't go through. Spirit has pretty much gotten its act together operationally while jetBlue struggles. Most of the frontline Spirit folks are against it.
I think Spirit is a better product than the typical ULCC and comes across a bit more polished than before.
This is completely untrue. There are 4 major country-wide airlines in the U.S. aside from the ULCCs. Western/Central Europe effectively has only 3 (IAG, Lufthansa Group, and Air France-KLM.) Europe just has the illusion of more airline choices because individual countries would never agree to give up their (usually only) major airline, so consolidation there preserved separate brands, but still reduced competition down to only 3 companies.
Fares for similar-length flights usually aren't terribly different between the U.S. and E.U., but virtually all flights within the EU are very short, where as the U.S. has lots of medium-haul domestic routes and even several long-haul ones. Unsurprisingly, ULCCs with absolutely miserable service are more popular in Europe than in the U.S. due to both significantly shorter average flight distance and also significantly lower average household disposable incomes.
The JetBlue/Spirit merger would get us significantly closer to having a 5th major country-wide airline aside from the ULCCs, at the expense of losing a ULCC. It's a lot easier for the market to replace a ULCC than it is for it to create a new country-wide non-ULCC airline, as there isn't really much of a minimum viable scale for a ULCC with a leisure-based point-to-point network.
As it stands right now, JetBlue is not in a position to be serious competition to the big 4 for anything other than people based in the Northeast or Florida due to their abysmal hub locations. If they play their cards right, buying scale through the Spirit purchase could allow them to quickly scale up to a network that is actually useful to most or all of the country, instead of just the Northern and Southern ends of the East Coast.
Delta and Northwest (I presume that is the merger you refer to) was the most "end on end" merger combination possible. Neither shared a hub - both had complimentary operations where they overlapped in Europe, NW didn't serve S. America while Delta, at the time of the merger had just one route to Asia (ATL-NRT). The elimination of CVG and MEM as hubs was a recognition that both were heavily dependent on connecting traffic using regional jets - which didn't benefit the local market near as much as it was inefficient.
Delta is still the largest airline at CVG but not at MEM. Providing good service to a city or region does not require having hubs.
And, again, the big difference between any of the legacy carrier mergers and JBLU/SAVE is that JBLU intends to take out a lower cost and lower fare competitor, something no legacy carrier has done.
By removing seats from every SAVE airplane and pricing the seats like a low cost carrier instead of an ultra low cost carrier, JBLU will be forcing up fares and removing capacity - again, something no other legacy carrier did.
As much as some think that JBLU is being picked on, there are major fundamental differences in the JBLU/SAVE merger that simply did not exist in other mergers.
And let's also not forget that SAVE and Frontier had a merger agreement and both of them are ultra low cost carriers. While there is no certainty that merger could have worked, JBLU came in and outbid ULCC (Frontier's stock symbol) and Frontier decided it wasn't worth it.
The reality is that SAVE could still be in play and the ULCC/SAVE merger could still happen but JBLU, SAVE and ULCC could be worse off now than a year ago because precious time and money has been spent pursuing a merger that many new could not be approved.
Blocking the merger over FLL would be stupid. FLL is 20 miles from MIA. It's not like they're truly separate markets. Southwest dominates lots of secondary airports in various markets. And it usually brings *down* the local prices in doing so.
"but Delta having absolute pricing power in ATL, MSP, dtw, and SLC is good?"
It is not necessarily good, but it many not have been uncompetitive at the time DL acquired NW. And hypothetically (because I don't actually know), if DL had 75% of the market in ATL and SLC, and NW 75% of the market MSP and DTW, the merger review would probably not care. It's when their is overlap in a market - combining two 35% entities into one in the same market is the issue.
And to all the posts about why past mergers went through and its not fair the gov't is challenging this one - two things: one, elections have consequences. A Democratic executive branch is more likely to flex its anti-trust muscles - though Obama sure didn't. Second, depending on the industry, there is usually a threshold where DOJ / FTC decide to act. It may appear arbitrary, but they have standards - "OK, as long as there are 5 competitors each with at least 15% market share, we won't oppose any mergers..." or "as long as the three largest airlines don't exceed 60% of the market, we'll let mergers through..." So AA/US may have been fine at the time, etc., but now the concentration would be too high. It also works the other way - the gov't did block UA/US from merging. And then both went on to find other partners.
"Maybe the judge has privately told the parties that they would be better off if they reach a settlement (if that's not considered unethical) - or maybe he's just dragging things out to give them that hint."
Doubtful - federal judges are always trying to clear their dockets. S/he may urging settlement - who knows - but they won't get more time for it.
B6 and AA are playing catch-up in the Northeast, though. I don't really see MCO being a problem. JetBlue and Spirit have just under 25% of the MCO traffic even after combining them. While they would have a combined 48% market share at FLL... that's not really telling the whole story. FLL isn't really a separate market. It's 20 miles from MIA, which is much larger and where Spirit + JetBlue have only somewhere around 10-12% (I don't see the exact figure for B6 right away because it isn't top 5 there.)
Overall, though, blocking the NE alliance and allowing the Spirit/JetBlue merger would make a lot more sense than the other way around.
I think the bigger concern and reason for the stock price slide (given this news was already kind of known) is reporting that the DOT may try to refuse to issue a new air operating certificate. Sure it’s not uncommon for merged airlines to operate on two certificates for months to a year or two. But at some point they need to operate on a single certificate to be able to blend crews, etc.
All of that is completely wrong. There are tons of 2 hour flights are next to nothing in Europe. In the us cheap flights are $200 expensive $900 for economy.
part of your post makes sense and parts do not.
Everyone of Delta's hubs comply with federal airport access regulations which means that Delta doesn't have absolute control over pricing. It wouldn't be difficult to find plenty of carriers that do undercut Delta.
And the same is largely true in other legacy carrier markets.
The most difficult airports in the US to access are actually Southwest hubs - specifically MDW, HOU and DAL.
As for the second part, you are correct. there is a threshold of concentration that a regulator can say the industry and JBLU/SAVE has reached. As much as some want to argue otherwise, none of the other legacy carrier mergers involved duplicate hubs in the same metro area. In fact, many can remember that there was a merger attempt between United and USAirways and it was blocked because it involved two hubs in two different airports in the same metro area (Washington DC). So the notion that JBLU is being held to a different standard is patently incorrect.
RC - Really? There was no hub shortage before mergers, just an appropriate number of hubs to accomplish the mission. I was always able to get to where I needed to go. No benefit to me with more hubs.
It is very likely that B6 is going to choose between giving up NE Alliance, spitting out JFK/LGA slots and merging with NK. As a AA flyer both of them sound good. Speaking of anyone at B6 cannot override 2min less MCT, and their poor poor support on connection, I am not really a fan on flying on B6 rather than AA. Will be welcomed if Raja finally found out JV-ing without really flying with some random airlines does nothing good to holding the slots but puts them in a constant fear of their partners running away over some airplanes, and can make a comeback to NYC area.
The NEA deal allows AA/B6 to actually compete on routings with Delta and United (who currently dominate a split NYC market between JFK/LGA [Delta] and EWR). Delta also put a ton of upward pressure on fares in Boston. Hoping Biden and Khan keep this agreement in place. The Spirit merger would just be bad for all operations (although United would have finally gotten a valid reason to complain about JFK slots, as Spirit and JetBlue could offer true competition at Newark).
The time to promote competitiveness in the US airline industry was to take action and block the Big 4 from getting bigger and dominant. That damage has been done. Preventing smaller US airlines from working to be competitive via mergers and alliances increases the risk of their failure to remain in operation. Thus I believe the Department of Justice's actions may lead to even less airline competition, not more.
Back in 2000-2013 all the legacies except Southwest went through bankruptcies. This caused them to underinvest in their product and had poor labor relations. I am content with the stability the system has now achieved with 4 main carriers.
If an airline charges "next to nothing" how do you think they are valuing safety, treating their employees and customers? US airlines traditionally made in the single digit profit margin. A 1000 mile trip has a cost when you want to be treat like a human and have some space in a seat. Thanks but I am content not having RyanAir in the US
I really hope the DoJ gets its way. I also hope that B6 is utterly and completely destroyed and ceases to exist. If it takes out NK in the process, all the better. But B6 delenda est.
goodness we went from an Obama administration that let all these mergers happen, now we have a Biden administration that caters to a different fringe that doesn't like mergers. I'm a libertarian and a realist. If the mergers took place they should have been based on the fact that no government money would ever come to bail them out. Want to see competition, get the government out of both regulations and being a piggy bank
Most insightful comment here. Respect. The opportunity to ensure competitiveness in our airlines was forfeited when we allowed the creation of the behemoths of AA, DL and UA. Any government action now is untimely and will do nothing but embolden the current oligopoly dominating the industry and hurt consumers in the process.
Your second sentence makes no sense. Your bias against Democrats is obvious. Your illusion about free markets and the airline industry is laughable.
Didn’t Southwest do exactly what you are saying JetBlue is trying to do, when they acquired AirTran Airways? BTW did Delta take those 717’s off SWA’s hands?