May 22, 2023 - Economy

JetBlue's ambitions could be grounded by antitrust regulators

Illustration of an airplane flying on a short chain.

Illustration: Aïda Amer/Axios

We've all had the dreadful moment of realization that a flight delay is about to become a flight cancellation. That must be how JetBlue is feeling right now about its proposed $3.8 billion takeover of low-cost carrier Spirit Airlines.

Driving the news: A federal judge on Friday ruled that JetBlue and American must dissolve their partnership in the Northeastern U.S., agreeing with the U.S. Justice Department that the alliance is anti-competitive.

  • DOJ had sued in late 2021, arguing that the airlines coordinating on prices and schedules would result in higher fares and reduced consumer choice.
  • These are the same arguments, albeit with different specifics, that DOJ is using in its more recent effort to block JetBlue-Spirit. That case is scheduled to be heard in the same courtroom this October, but by a different judge.

The big picture: This is a double-whammy for JetBlue.

  • First, the American Airlines deal was designed to help it attract frequent fliers (read: business travelers) who prefer Delta or United because of their more robust national reach. The airlines now have 30 days to unwind the partnership, although they are allowed to appeal.
  • Second, JetBlue would need to pay a $400 million breakup fee to Spirit shareholders were that deal to be successfully blocked by regulators.

Investor reax: JetBlue shares haven't really budged since the Friday ruling, but are down over 60% since it first bid on Spirit in April 2021.

The bottom line: The Biden administration has a losing record so far on antitrust cases, despite its numerous efforts. But the American-JetBlue victory, although not technically about a merger, may be a sign that DOJ is sharpening its arguments. Or just that airlines don't make sympathetic defendants.

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