JetBlue Airways said Monday that it is “highly likely” the Justice Department will sue the company this week over its planned acquisition of Spirit Airlines. The $3.8 billion deal may create a new challenge for the country’s four dominant carriers, but it will also add to industry consolidation.
JetBlue said it had been preparing for such a case for a long time and that the deadline for closing the deal remains unchanged if it survives an expected court challenge.
“We believe that a complaint from the DOJ is more likely this week, and we have always counted on our timeline to complete the transaction in the first half of 2024,” the company said.
Critics of the deal say removing spirits from the market would restrict competition and further consolidate an already concentrated industry. While JetBlue is known for affordability, Spirit offers even lower fares, charging extra for everything from printing boarding passes at airport kiosks to selecting seats in advance. After the deal, JetBlue reconfigured Spirit’s densely packed planes, removing seats and increasing legroom to adjust the economy of each flight.
According to two people familiar with the Justice Department’s plans, the government will file a lawsuit saying that after removing the seats from Spirit flights, the combined airline can’t increase revenue without raising prices per passenger.
Buying Spirit will allow JetBlue to accelerate its growth plans. Today, JetBlue controls more than 5 percent of the US airline market. After the acquisition, it will have a 10 percent share, making it the fifth largest airline in the country. United Airlines, the fourth largest airline, has a market share of 15 percent. Southwest Airlines, Delta Airlines and American Airlines each have a share of more than 17 percent.
“JetBlue’s Spirit combination allows it to create a compelling national challenge to these dominant airlines” JetBlue said A news release on Monday detailed some of its arguments in favor of the deal.
The acquisition will benefit consumers and disrupt the industry, allowing JetBlue to bring lower fares to new markets and forcing those larger airlines to match its lower prices. Boston, New York and Fort Lauderdale, Fla. JetBlue said it has committed to divest some of Spirit’s shares in markets like
But two people familiar with the Justice Department’s plans said its lawsuit would confirm that other airlines with pricing structures different from Spirit’s would take the slots Spirit might offer.
Opponents of the sale argued that not only the judiciary but also the Department of Transport could block the deal by preventing them from changing operating certificates.
Spirit shares fell more than 8 percent after the announcement on Monday of expectations of federal action to block the takeover. Shares of JetBlue rose about 1 percent.
Unions representing workers at both airlines are split on whether the merger should go ahead. Last month, the Flight Attendants Association—CWA, which represents 5,600 flight attendants at Spirit—asked Attorney General Merrick B. wrote to Garland and Transportation Secretary Pete Buttigieg.
“The JetBlue-Spirit merger will help fix conditions in the industry with proven improvements and protections for workers with greater competition that will benefit workers and consumers alike,” union president Sarah Nelson said in the letter. “It’s anti-affiliation, anti-affiliation.”
In a separate letter, the president of the Transportation Workers Union, which represents 6,800 JetBlue flight attendants, Mr. Garland and Mr. Butiguek asked to block the takeover, arguing it would violate antitrust laws and undermine competition and workers.
In a letter in September, Senator Elizabeth Warren, D-Massachusetts, said Mr. He asked Buttigieg to intervene using his department’s “historically underutilized” officers.
JetBlue is also awaiting the outcome of a judicial antitrust case over the airline’s partnership with American in Boston and New York. A federal judge in Boston is expected to issue a decision in that case soon.
Lauren Hirsch Contributed report.