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Google PlayJetBlue agreed to buy Spirit Airlines on Thursday for a reported $3.8 billion.
The Associated Press reports the deal faces a significant hurdle in receiving approval from antitrust regulators in the Biden administration who may be wary of allowing an already limited number of airline options in the United States to shrink even further. A merger would make JetBlue the nation’s fifth-largest airline company with just over a 10 percent share of the market, behind United Airlines, Delta Air Lines, Southwest Airlines, and American Airlines, respectively.
The Justice Department filed a lawsuit against JetBlue and American Airlines last year in an attempt to break up its “Northeast Alliance” which would consolidate operations in Boston and New York City. U.S. Attorney General Merrick Garland argued that such an agreement would lead to higher prices and fewer choices. The latter reason could serve as one of the main arguments in opposing the Spirit Airlines acquisition.
The major five airlines in the U.S. would assume nearly 80 percent of the market, leaving competitors, such as Frontier Airlines, in a difficult spot. JetBlue’s agreement to purchase Spirit Airlines comes one day after it was announced that a merger with Frontier was nixed since Spirit shareholders were expected to reject a deal in pursuit of a more lucrative offer from JetBlue.
Frontier’s deal, which consisted of cash and stocks for more than $2.6 billion, was approved by Spirit’s board under the assumption that their merger wouldn’t receive pushback from antitrust regulators. CNBC speculates if the Biden administration would approve of a budget airline like Spirit getting overtaken by a dominant carrier such as JetBlue at a time where inflation concerns continue to run rampant across the country.
JetBlue CEO Robin Hayes believes the Spirit merger would expand airline competition by giving his company a seat at the table typically reserved for the other four major airlines.
“The real issue here though is clearly what can we do in the U.S. to make a more competitive airline industry against the large, big four airlines,” Hayes said in an interview, per CBC News. “We believe the most disruptive, the most effective thing that we can do is build a bigger JetBlue more quickly than we otherwise could.”
