By Nate Raymond
BOSTON (Reuters) – A U.S. Department of Justice lawyer on Tuesday urged a federal judge to block JetBlue Airways’ planned $3.8 billion acquisition of ultra-low-cost carrier Spirit Airlines at the start of closely-watched antitrust trial.
The case in federal court in Boston is part of a broad effort by President Joe Biden’s administration to preserve competition among the lowest cost airlines, ensuring air travel remains affordable for many more US consumers.
Justice Department attorney Arianna Markel in her opening statement told U.S. District Judge William Young that the deal would lead to fewer flights and seats and higher prices.
She said a JetBlue internal analysis projected its fares would increase 30% once Spirit, which competes with JetBlue on around 100 routes nationally, is not a competitor. Passengers would suffer roughly $1 billion in net harm annually, she said.
“JetBlue is counting on the fact that eliminating Spirit and the competition Spirit provides will allow JetBlue to raise fares,” Markel said. “That is real harm to real people.”
JetBlue attorney Ryan Shores countered that the case was a “misguided” challenge to a merger between the U.S.’s sixth and seventh largest airlines, which combined control less than 8% of the domestic market dominated by four larger airlines.
Those four U.S. carriers – United Airlines, American Airlines, Delta Air Lines and Southwest Airlines – dominate 80% of the domestic market following a series of previous airline mergers that the federal government blessed, Shores said.
Yet Shores said the government had wrongly tried to bar JetBlue from growing into a larger challenge to those four airlines and disrupt a market that has become “bad for competition and bad for consumers.”
“The government in this case has lost the forest for the trees,” Shores said.
The trial began on the same day JetBlue posted lower-than-expected third-quarter results, citing air traffic control and weather delays during the summer travel season, and projected a larger-than-expected fourth-quarter loss.
Its shares were down 16.7% to a near 12-year low in morning trading.
JetBlue has called the deal pro-consumer and has sought to ease U.S. regulators’ antitrust concerns by agreeing to sell off Spirit’s gates and slots at certain airports in New York City, Boston, Newark and Fort Lauderdale.
But the Justice Department has said those divestitures are not enough, and in a lawsuit filed in March argued the combined airline would harm consumers by increasing fares and reducing choice on routes nationwide.
The department is suing alongside Democratic attorneys general from six states and the District of Columbia. They call Spirit a “disruptive and innovative airline” whose low-cost, no-frills model has forced price cuts industry-wide.
The department’s case is part of a broader push by the Biden administration to aggressively step up antitrust enforcement, an initiative that has had mixed results in court.
JetBlue was already the focus of one of its earlier cases, with a different Boston judge, Leo Sorokin, in May siding with the government in finding that JetBlue’s U.S. Northeast partnership with American Airlines violated antitrust law.
JetBlue subsequently decided to terminate the alliance. American Airlines is appealing Sorokin’s decision.
(Reporting by Nate Raymond in Boston, Additional reporting by Jonathan Stempel in New York; Editing by Alexia Garamfalvi, Nick Zieminski and Marguerita Choy)