unaligned

The Justice Department on Tuesday sued to block JetBlue Airways’ $3.8b proposed takeover of budget carrier Spirit Airlines, the Biden administration’s latest attempt to prevent industry consolidation. Spirit Airlines agreed to sell itself to JetBlue last summer after a long battle for the carrier between JetBlue and Frontier Airlines. New York-based JetBlue’s acquisition of Spirit faced a high hurdle with regulators from the start, and the airline on Monday said it expected DOJ action this week. JetBlue’s takeover of Spirit would create the fifth-largest airline in the country and also eliminate Florida-based Spirit, with its business model of rock-bottom fares and fees for everything from carry-on baggage to seat assignments. “JetBlue’s plan would eliminate the unique competition that Spirit provides—and about half of all ultra-low-cost airline seats in the industry—and leave tens of millions of travelers to face higher fares and fewer options,” the Justice Department said in its complaint, filed in a Massachusetts court on Tuesday. “Spirit itself put it simply: ‘A JetBlue acquisition of Spirit will have lasting negative impacts on consumers.’” At a Tuesday press conference, Attorney General Merrick Garland underscored that the merger would be particularly harmful for “working and middle class Americans who travel for personal rather than business reasons and must pay their own way.” The DOJ cited Spirit’s own internal documents that show that when the airline starts flying a route, average fares fall by 17%. JetBlue has argued the combination would allow it to better compete with large airlines that dominate the US market. The deal would also give JetBlue access to more Airbus jetliners and pilots, which are both in short supply as travel demand remains strong. JetBlue plans to remodel Spirit’s bright-yellow planes with packed-in seats to JetBlue’s, which include seatback screens and more legroom.<br/>

JetBlue CE Robin Hayes strongly defended the airline’s $3.8b plan to buy ultra-low cost carrier Spirit Airlines despite the Justice Department's lawsuit Tuesday challenging the deal. "Of course we’re going to continue to offer low fares,” Hayes said. "This argument that we'll take seats outs and fares are going to go up. We’re going to put capacity back," by doing things such as using larger planes on existing routes and by flying planes more often. He said that JetBlue will still serve Spirit customers buying very low-cost tickets after a merger and rejected the idea that fares will go up. "I fully recognize that very price-conscious customer and it's very important that the larger JetBlue continues to cater and provide a service to that customer and we absolutely will," Hayes said. "We will not be successful here if we just do not have a product to offer to those customers." The Justice Department said the deal would eliminate half of the ultra-low-cost capacity in the United States, resulting in higher fares and 10%-15% fewer seats to airplanes and "harming millions of consumers on hundreds of routes." If the merger was completed "JetBlue would likely increase prices on every route where Spirit flies today," it said. Hayes noted the FAA is studying whether to set minimum seat requirements and President Joe Biden has criticized so-called "junk fees" like some airline costs. "The government needs to be clear about what the priorities are," Hayes said. "JetBlue is the gold standard of leg room and then we don't like junk fees but we're thinking an airline that has more ancillary fees is innovative," referring to the Justice Department's praise of Spirit.<br/>

A US federal lawsuit to block JetBlue Airways Corp's purchase of Spirit Airlines has raised hurdles for future airline deals, making it harder for companies to pursue growth and manage costs. The US Justice Department's lawsuit on Tuesday comes at a time when US carriers are struggling to boost capacity because of shortages of pilots and aircraft. They are also facing higher costs following a run-up in fuel and labor bills. Mergers and acquisitions are a time-honored way for companies to both boost revenue and profit through cost cutting. But the DOJ lawsuit could send a chill through airline boardrooms, said Addison Schonland, partner at consulting firm AirInsight. But the cost pressures are so onerous, airlines will have no choice but to keep kicking the tires on deals, he said. "The hurdle has gone up clearly," Schonland said. "This is going to slow things down, but it won't stop it." If the Justice Department scuttles the $3.8b JetBlue-Spirit deal, he said the two airlines may look at other ways to collaborate, including codeshare agreements in which airlines market and sell tickets on the same flight under their own name and flight number. Some Democratic lawmakers are not in favor of a further consolidation in the industry on concerns it would harm consumer interests. American Airlines, United, Delta and Southwest control 80% of the domestic market. "Americans want more choices and lower prices for airline tickets, not another giant merger," US Senator Elizabeth Warren said on Twitter on Tuesday. Any airline seeking a merger under the Biden administration will have to be "very careful" about its choices and the way it plans to create value for the traveling public, said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group. "The government has said that it is not going to rubber- stamp mergers," he said. The lawsuit against the JetBlue-Spirit deal was widely expected because of the Biden administration's crackdown on large deals between publicly listed companies, analysts said.<br/>

Turkish carrier Pegasus Airlines jumped back to the black last year in posting a record operating profit of E633m driven by a more than doubling in revenues. Pegasus revenues jumped from just over E1b in 2021 to E2.45b last year. That outstrips a previous revenues high of E1.74b in 2019. Notably, Pegasus revenue from international flights in Q4 was more than double the same period in 2019. That was achieved even though passenger numbers of 26.9m and load factors of 83.6% were both down on 2019’s 30.9m and 88.6% respectively. The improved revenue performance reflects longer average stage-lengths – Pegasus capacity was higher than in 2019 – and improved yields. This helped Pegasus post a full-year operating profit of E607m – including E197m in Q4 – compared with a loss of E19m in 2021. It was also back to a net profit of E431m for the year, turning round a loss of E150m. Pegasus expects to lift capacity a fifth for 2023 and to increase its fleet to 102 aircraft from 96 at the end of last year. That includes the further transition towards an all-Airbus fleet through the addition of A321neos. Pegasus is due to take 15 A321neos this year, adding to 25 already in the fleet, and a further 33 over 2024 and 2025. It already has 46 A320neos as well as seven A320s, one of which will exit the fleet in 2023, while eight of its 18 remaining Boeing 737-800s are set to be withdrawn this year.<br/>

Icelandair is to support a domestic initiative to produce sustainable aviation fuel by provisionally agreeing to an offtake of the fuel. It has entered the memorandum of understanding with IdunnH2, a company established in 2020 which is developing a commercial-scale synthetic fuel facility in Helguvik Harbour, close to Icelandair’s base at Reykjavik Keflavik airport. Icelandair will take up to 45,000t of sustainable carbon-neutral fuel from 2028 onwards. It says it will account for a 10% annual reduction of carbon emissions on its international network. The carrier has already been modernising its fleet with the introduction of more fuel-efficient Boeing 737 Max jets. “We want to pull our weight to support pioneers that are working on the development of sustainable fuels in Iceland,” says Icelandair chief Bogi Nils Bogason. He says such fuels will play an “important role” in decarbonisation, but adds: “There is not enough production in the world today and therefore not enough supply. We believe there are great opportunities for Iceland to start such production.” IdunnH2 refers to the sustainable fuel as ‘e-kerosene’, produced by combining green hydrogen – produced through renewable energy – with carbon dioxide from the atmosphere or an industrial source. The company says its project will use fully-renewable energy off the grid. “We’ve worked diligently on bringing the relevant stakeholders to the table to establish the benefits of having such a facility in Iceland,” says chief executive Audur Baldvinsdottir. “We are pleased that our largest carrier is prepared to step up and support our development plan.” Icelandair will use this sustainable fuel, blended with conventional fuel, to power its current aircraft fleet.<br/>

Thai VietJetAir is preparing to radically restructure both its network and fleet as it moves to phase out its Airbus aircraft and bring in Boeing planes while also switching from a domestic to international focus. Speaking at Routes Asia 2023 recently, CEO Woranate Laprabang said revenue increased by 100% in 2022 and he expects to see a similar result this year. Already, the low-cost carrier is pivoting away from its traditional Thai domestic market, with Thai VietJet also now flying to Viet Nam, Japan, China, Cambodia, Singapore, and Taiwan. Nonetheless, currently nine out of the airline's top ten busiest routes (when measured by available seat kilometres (ASKs) and flight frequencies) are domestic, with only one international route - Bangkok Suvarnabhumi - Da Nang, coming in at eighth place on both metrics. However, Woranate expects ASKs on international sectors to increase by 35% this year, and 300% when the full network restructuring is completed later this decade. The CEO also confirmed that the existing fleet of twelve A320-200s and six A321-200s, which all come on leases from affiliate VietJetAir, will be phased out by 2024. In mid-2023, Thai VietJet will receive its first B737-8, the first of 50 it will receive between then and 2027. These planes are taken from a 200-strong order placed by VietJet. As the Boeings arrive, the Airbus aircraft will be progressively returned to VietJet.<br/>