A Federal Judge Blocks the JetBlue-Spirit Merger

Yes, JetBlue and Spirit are wounded airlines. But that doesn't mean they get to merge

Dear readers,

While I have made no secret of my disdain for JetBlue's strategy, I understood the premise behind the airline's desire to acquire Spirit. This is a scale business, and one of JetBlue's many problems is its size; it is a small East Coast-centric airline that even gets pushed around in its focus cities by Delta and United. JetBlue would have benefitted from absorbing Spirit's airplanes, crews, and nationwide presence, even if it would have struggled (mightily) with integration.

But as we learned in May when a federal judge made JetBlue end its regional partnership with American, ruling it anticompetitive, this is not the friendliest environment for airline partnerships and mergers. In today’s post, I want to summarize the judge’s opinion denying the merger, because it’s important. Most of us are airline experts, not legal scholars, and I think it’s helpful to grasp the details of why this proposed merger got shot down, before we focus (in another post) on the murky futures of JetBlue and Spirit.

So here’s the gist: In July 2022, JetBlue sought to become the nation’s fifth-largest carrier, with roughly 10 percent of the domestic market, by announcing it would acquire Spirit for $3.8 billion. In March 2023, the U.S. Department of Justice sued to block the deal, saying it would (illegally) reduce competition. In his decision released Tuesday, Judge William G. Young of the U.S. District Court for the District of Massachusetts sided with the Department of Justice, reminding JetBlue and Spirit that the Clayton Antitrust Act of 1914 bars mergers that would "substantially" lessen competition. This proposed merger, he said, would do just that.

”If JetBlue were permitted to gobble up Spirit — at least as proposed — it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline," Young wrote. “It would further consolidate an oligopoly by immediately doubling JetBlue’s stakeholder size in the industry. Worse yet, the merger would likely incentivize JetBlue further to abandon its roots as a maverick, low-cost carrier."

And even worse than that, according to Judge Young, would be the loss of Spirit’s low-cost influence in the market — specifically where both airlines compete. What’s interesting is that Young, a Ronald Reagan appointee, was sympathetic to some of JetBlue’s arguments about why it would want to pursue inorganic growth and eliminate a key competitor. But just as his colleague Judge Leo Sorokin (a Barack Obama appointee) ruled in the Northeast Alliance case, Young said the “proposed acquisition…does violence to the core principle of antitrust law: to protect the United States’ markets — and its market participants — from anticompetitive harm.”

I spent some time on Tuesday parsing key points of Young’s ruling. Here is what I found most interesting.