JetBlue’s Spirit deal painted as attempt to eliminate low-cost rival

JetBlue Airways’ $3.8b deal to acquire Spirit Airlines is an effort to get rid of a low-cost rival and boost ticket prices across a wider network of flights, a US Justice Department lawyer told a judge at the start of an antitrust trial in Boston. “JetBlue is counting on the fact that eliminating Spirit and the competition Spirit provides will allow JetBlue to increase fares,” DOJ attorney Arianna Markel said Tuesday during her opening statement. “That is real harm to real people.” The deal is intended to make “a bigger, turbo-charged JetBlue,” she said. “But bigger isn’t always better.” The federal government, along with six states and Washington DC, sued last year to block the deal it says would kill JetBlue’s fastest growing competitor in the US and limit choices for passengers. But JetBlue lawyer Ryan Shores called the government’s objections “misguided” and told the judge that combining with Spirit was necessary for the two small carriers to better compete with larger rivals. The case is the latest effort by the federal government to crack down on airline consolidation after decades of lax enforcement that left the nation’s four biggest airlines — American Airlines Group Inc., Delta Air Lines Inc., United Airlines Holdings Inc. and Southwest Airlines Co. — with 80% of the market. JetBlue’s internal documents “will show that a bigger JetBlue means fewer planes, fewer seats and higher fares,” Markel said, adding that the company plans to reduce its capacity after the combination by removing 10% to 15% of available seats. “JetBlue itself projects that fares will increase 30% after Spirit exits.” The government lawyer said Spirit is able to charge less than JetBlue because it has lower costs than its rival. The so-called “Spirit effect” on routes reflects the 20% average drop in fares from all carriers on routes where the company competes, Markel said.<br/>