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Federal Judge Suggests Possible Conditional Approval for JetBlue-Spirit Merger

By  |  December 5, 2023

As the antitrust trial concerning the proposed $3.8 billion acquisition of Spirit Airlines by JetBlue Airways concluded in a Boston courtroom, U.S. District Judge William Young expressed reservations about the Justice Department’s plea for a permanent injunction to block the deal. The judge raised the possibility of allowing the merger to proceed with certain conditions, particularly if JetBlue were to divest more assets, reported Reuters.

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    Judge Young emphasized his concerns about potential fare increases in the absence of ultra-low-cost carrier Spirit Airlines, known for undercutting competitors and driving down prices. The trial, which began on October 31, saw both sides presenting their closing arguments.

    While JetBlue has already agreed to sell gates and slots at major airports to address regulatory concerns, Judge Young hinted at the need for additional divestitures. He acknowledged that he had encountered cases where a court found divestitures close but insufficient, suggesting that the deal might gain approval with further asset divestment.

    The Justice Department, along with six U.S. states and the District of Columbia, initiated the lawsuit in March, asserting that the proposed merger would harm competition in the airline industry. Young expressed reservations about a permanent injunction, given the dynamic nature of the aviation sector in the post-COVID environment.

    Read more: JetBlue & Spirit Airlines Antitrust Trial Date Set For October

    During the trial, JetBlue argued that the merger was pro-consumer and vital for the company to become a significant challenger to dominant airlines in the industry. The airline’s attorney, Ryan Shores, emphasized that the merger would position JetBlue as a disruptive force and a viable national competitor.

    Shores contended that lower-cost carriers, like JetBlue and Spirit, faced financial challenges following industry disruptions caused by the COVID-19 pandemic. Unlike the four largest U.S. carriers—United Airlines, American Airlines, Delta Air Lines, and Southwest Airlines—that control 80% of the domestic market, JetBlue and Spirit combined only command about 8%, according to their lawyers.

    Justice Department attorney Edward Duffy argued against conditional approval, stating that a full-stop injunction was necessary to restore competition. He expressed concerns that allowing the merger would lead to higher prices and fewer flights, particularly with Spirit no longer competing independently. Duffy cited JetBlue’s own projection of a 30% fare increase as evidence of the potential negative impact on consumers.

    Judge Young, while raising the possibility of a conditional approval, clarified that his questions were not indicative of his final ruling. The case is part of the Biden administration’s efforts to maintain competition in the airline industry and strengthen antitrust enforcement across various sectors.

    Source: Finance Yahoo