Over the last six months, Spirit Airlines stock has plummeted,[1] and there are now reports that the airline’s pilots are actively hunting for jobs elsewhere.[2] This downward spiral comes on the heels of a federal judge’s blockage of the proposed $3.6 billion acquisition of Spirit by JetBlue Airways last month.[3] In his opinion, United States District Judge William Young wrote “[t]o those dedicated customers of Spirit, this one’s for you.”[4] Moreover, Judge Young stated that the elimination of Spirit, a budget carrier, would “harm cost-conscious travelers” who have benefited from Spirit’s affordable fares.[5] However, it remains to be seen whether this decision was ultimately a successful protective measure for consumers or a misguided antitrust action that will only prove to harm a vulnerable airline when it needed a lifeline.
The Department of Justice (DOJ) initially brought the claim to halt the JetBlue-Spirit deal in March 2023. It was the DOJ’s assertion that the deal would eliminate Spirit’s ultra-low-cost business model that has increased competition across the airline industry,[6] thus creating an anticompetitive environment.[7] In response, JetBlue and Spirit, the sixth and seventh largest U.S. airlines respectively, argued that “by combining, they would better be able to compete against the largest US airlines.”[8] Given that four airlines, known as “the Big 4,” dominated 79% of the U.S. market as of 2020, the parties argued the deal would help JetBlue, a relatively small airline, compete nationally.[9] While the court ultimately sided with the government,[10] it is important to consider whether or not Judge Young’s ultimate holding is consistent with the legislative intent of Section 7 of the Clayton Act.
Under this Act, the law prohibits any merger or acquisition of stock or assets that may effectively “lessen competition, or … tend to create a monopoly.”[11] According to the DOJ’s Antitrust Division, the Act seeks to “maintain a fair marketplace where various companies can compete, giving consumers more options and better prices, and giving workers a fair market for their labor.”[12] In blocking the JetBlue-Spirit deal, a strict interpretation of the letter of the law has been applied. At the same time, if Spirit is unable to weather the storm on its own as a result, thousands of jobs will be lost and consumers will have one less affordable airline option to choose from.[13] As such, this blocked deal would appear to be inconsistent with, pardon the pun, the spirit of the law.
As a result of the blocked JetBlue-Spirit deal, experts are now calling into question how successful other mergers within the airline industry will be.[14] In December 2023, the proposed acquisition of Hawaiian Airlines by Alaska Airlines was announced.[15] However, given that the current DOJ may now be motivated to continue its victory streak, the Alaska-Hawaiian merger could be its next target.[16]
Beyond airlines, players in other industries may also become targets of the DOJ in the near future. Antitrust concerns have already arisen over the recently announced acquisition of Discover Financial Services by Capital One.[17] Carrying a colossal $35.3 billion price-tag,[18] the Capital One-Discover deal would be an even bigger notch on the DOJ’s belt. If that deal meets a similar fate in federal court as the one between JetBlue and Spirit, will it truly promote the goals of antitrust legislation to benefit consumers? Or, as we saw with JetBlue and Spirit, will it only prevent smaller players from becoming more competitive in the U.S. market?
[1] Veronika Bondarenko, Spirit Airlines Stock is Still Tanking After the Blocked Merger, TheStreet (Jan. 17, 2024), https://www.thestreet.com/travel/spirit-stock-after-blocked-merger#:~:text=With%20the%20low%2Dcost%20airline,in%20the%20last%20six%20months.
[2] Reuters, Spirit Airlines Pilots Sending Out Résumés After JetBlue Deal Collapse: ‘It’s Very Stressful’, NY Post (Feb. 12, 2024), https://nypost.com/2024/02/12/business/spirit-airlines-pilots-sending-out-resumes-after-jetblue-deal-collapse/.
[3] Nate Raymond et al., US Judge Blocks JetBlue from Acquiring Spirit Airlines, Reuters (Jan. 16, 2024),
https://www.reuters.com/markets/deals/us-judge-blocks-jetblue-acquiring-spirit-airlines-2024-01-16/.
[4] Bondarenko, supra note 1.
[5] Leslie Josephs, Why the JetBlue-Spirit Antitrust Ruling Doesn’t Spell Doom for an Alaska-Hawaiian Merger, CNBC (Jan. 19, 2024), https://www.cnbc.com/2024/01/19/jetblue-spirit-ruling-alaska-hawaiian-merger.html.
[6] Leslie Josephs, Judge Blocks JetBlue-Spirit Merger After DOJ’s Antitrust Challenge, CNBC (Jan. 16, 2024), https://www.cnbc.com/2024/01/16/jetblue-spirit-merger-block-in-win-for-bidens-justice-department.html.
[7] Amy N. Vegari & Jacqueline L. Brandon, Recent DOJ Antitrust Cases Against JetBlue, Patterson Belknap: Antitrust Update (May 11, 2023), https://www.pbwt.com/antitrust-update-blog/recent-doj-antitrust-cases-against-jetblue.
[8] Samuel Engel, Why Logic Supports the Merger of JetBlue, Spirit, CommonWealth Beacon News (Feb. 17, 2024), https://commonwealthbeacon.org/opinion/why-logic-supports-the-merger-of-jetblue-spirit/.
[9] Alma Simon, JetBlue-Spirit Merger Halted: Industry Impact, Travel Wires (Feb. 14, 2024), https://www.travelwires.com/jetblue-spirit-merger-halted-industry-impact.
[10] Engel, supra note 8.
[11] 15 U.S.C. § 18.
[12] U.S. Department of Justice, The Antitrust Laws (last visited Feb. 24, 2024), https://www.justice.gov/atr/antitrust-laws-and-you.
[13] Engel, supra note 8.
[14] Josephs, supra note 5.
[15] Alaska Airlines, Alaska Airlines and Hawaiian Airlines to Combine, Expanding Benefits and Choice for Travelers Throughout Hawai‘i and the West Coast, Alaska Airlines: News & Stories (Dec. 3, 2023), https://news.alaskaair.com/newsroom/alaska-airlines-and-hawaiian-airlines-to-combine-expanding-benefits-and-choice-for-travelers-throughout-hawaii-and-the-west-coast/.
[16] Josephs, supra note 5.
[17] Lauren Hirsch & Emma Goldberg, Capital One to Acquire Discover, Creating a Consumer Lending Colossus, NY Times (Feb. 19, 2024), https://www.nytimes.com/2024/02/19/business/capital-one-discover-merger.html?campaign_id=190&emc=edit_ufn_20240219&instance_id=115576&nl=from-the-times®i_id=218248846&segment_id=158624&te=1&user_id=32375cc025da9f751b4e454d8d6263d0.
[18] Tony Romm & Abha Bhattarai, Capital One-Discover Merger May Face Stiff Antitrust Review in Washington, Wash. Post (Feb. 20, 2024), https://www.washingtonpost.com/business/2024/02/20/capital-one-discover-merger-washington/.
