On July 28, 2022, JetBlue Airways Corporation (“JetBlue”), the sixth largest airline in the United States, announced that it had executed a final merger agreement with Spirit Airlines, Inc. (“Spirit”), the seventh largest domestic carrier, pursuant to which JetBlue would pay $3.8 billion to acquire Spirit.[i] Both airlines are low-cost carriers, with Spirit being of the ultra-low-cost variety, such that their business models operate on targeting “budget-conscious passengers with low-cost, often unbundled flight options.”[ii] Were the merger successful, JetBlue would acquire all of Spirit’s assets, and Spirit would cease to operate in the airline market.
In response to the announcement, the United States Department of Justice (“DOJ”), along with various states and Washington, D.C., filed suit against JetBlue and Spirit.[iii] Invoking the Clayton Act, the DOJ sought to enjoin the two airlines from proceeding with the merger, arguing, as the United States District Court for the District of Massachusetts would later state, that were JetBlue successful in acquiring Spirit, “it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline” and “would further consolidate an oligopoly by immediately doubling JetBlue’s stakeholder size in the industry.”[iv] Of particular importance is the fact that although they follow distinct business models, JetBlue and Spirit share many of the same routes and passengers, such that “[w]here JetBlue and Spirit compete, travelers win–customers enjoy the benefits of both the Spirit and JetBlue Effects, fares go down, and more Americans can afford trips they could not before.”[v] A merger between the two airlines, therefore, would eliminate Spirit from the marketplace, depriving budget-conscious leisure travelers of a low-cost alternative to the higher rates of mainline legacy airlines, as well as those of JetBlue, who, although ostensibly a low-cost carrier, “prides itself as a ‘maverick and ‘unique disruptor’ in the airline industry, often taking an aggressive approach to competing with legacy and other low-cost carriers.”[vi]
Ultimately, on January 16, 2024, the district court found that the proposed merger between JetBlue and Spirit was violative of the Clayton Act and, as a result, permanently enjoined the airlines from proceeding with the merger.[vii] Central to this determination was the competing routes served by both carriers, with the court finding that the DOJ “has clearly demonstrated that the merger will cause unilateral anticompetitive effects, as JetBlue and Spirit currently compete head-to-head on multiple routes.”[viii] In essence, by removing Spirit as a competitor, those looking for low-cost options on some of the busiest routes in the United States will be deprived of a budget-friendly alternative to the higher rates charged by JetBlue and the legacy carriers. As such, JetBlue is not only removing one of its fiercest competitors; it is seeking to ensure that its bottom-line will not be challenged by a popular ultra-low-cost carrier with an expansive domestic network that continuously siphons away potential fliers due to its alluring business model and innovative marketing strategy. As the court succinctly stated, “consumers value Spirit flights as a unique, economical product option. The removal of Spirit as an option for consumers, therefore, would constitute a cognizable harm.”[ix]
On March 7, 2024, in response to the court’s order permanently enjoining the merger, JetBlue and Spirit announced that they were canceling their merger agreement, with JetBlue CEO, Joanna Geraghty, stating that “the probability of getting a green light to move forward with the merger anytime soon is extremely low.”[x]
However, in a tell-tale sign of the aggressive nature of airline consolidation in the United States, on December 3, 2023—in the midst of the DOJ’s lawsuit against JetBlue and Spirit—Alaska Airlines (“Alaska”) announced that it had reached an agreement to purchase Hawaiian Airlines (“Hawaiian”) as part of a $1.9 billion deal, with the transaction expected to close within twelve to eighteen months.[xi] Although the DOJ has remained silent about the merger and has refused to indicate whether it will pursue legal action to block the acquisition, the nature of the business relationship between Alaska and Hawaiian, as opposed to that between JetBlue and Spirit, is worth exploring in order to determine whether a permanent injunction would be proper. The two factors that will be most indicative of whether the DOJ will intervene are: (1) the percentage of overlap between Alaska and Hawaiian’s routes, and (2) the airlines’ contrasting business models.
First, when the district court found that the JetBlue–Spirit merger violated the Clayton Act, it relied heavily on the fact that the two airlines share significant overlap in their flight operations, such that the merger will serve to eliminate Spirit, a low-cost alternative, from all of the routes the airlines have in common, which would lead to higher prices due to the decrease in competition. Conversely, the networks of Alaska and Hawaiian bear few similarities and overlaps, with only four percent (4%) of Alaska’s network facing Hawaiian, and the airlines only competing directly on a total of twelve routes between the west coast of the United States and Hawaii.[xii] This distinction has been repeated on multiple occasions by both companies, with an Alaska spokeswoman stating: “Our deal combines two airlines with complementary networks and we believe the transaction will enhance competition and expand choice for consumers.”[xiii] The two companies argue that by joining forces, they will be able to provide better services to travelers by offering a larger network and increased connectivity. However, while their lack of shared routes does appear to support this position, it is undercut by the fact that combined, the two airlines would control nearly half of all seats between Hawaii and the mainland United States. Given that Hawaiian and Alaska are currently the first and third largest operators in Hawaii, “the pair would have 40% of mainland capacity and slightly more (48%) to the West Coast states.”[xiv] In other words, while there is little overlap between the routes they currently operate, the merger will result in the dominance of the Hawaii-mainland U.S. sector by a single corporate entity.
Second, Alaska has announced that should the merger proceed, it plans on keeping the two brands separate, such that each carrier will retain its current business model. By contrast, “JetBlue had planned to remodel Spirit’s bright yellow and tightly packed planes to look like its own, which offer fewer seats, more legroom and other amenities.”[xv] This was particularly concerning for the court when evaluating the merger, stating that by replacing the high-density configuration of Spirit’s aircrafts with JetBlue’s—which includes additional legroom and in-flight entertainment—“annual seat departures will decrease by more than 6,100,000.”[xvi] As a result, by retaining their own seat configurations and layouts, Alaska and Hawaiian will not be reducing the number of available seats for passengers, which otherwise would result in diminishing supply in high-volume sectors, particularly between Hawaii and the mainland United States which, in turn, would result in higher rates for passengers.
These two differences are crucial in analyzing whether the DOJ is likely to file suit against Alaska and Hawaiian in an effort to permanently enjoin the airlines from proceeding with their merger plans. Although there is no certainty as to how the department will act, the stark differences in the business models and post-merger plans weigh heavily in favor of Alaska and Hawaiian. By having networks with minimal overlap and affirming their desire to keep their distinct models, the merger will have a substantially lower negative impact on travelers, which, ultimately, is the DOJ’s goal. In addition to the foregoing, another pivotal factor will be the outcome of the 2024 presidential election. The Biden Administration has taken a hardline stance against airline consolidation, having previously won a lawsuit to terminate a partnership between JetBlue and American Airlines, and now successfully preventing the merger of JetBlue and Spirit. Should Biden win reelection and the personnel at the DOJ remain the same, particularly Attorney General Merrick Garland, then there is an increased likelihood that the DOJ will intervene, maybe if not to enjoin the merger, then at least to place some safeguards to ensure competition and prevent a significant decrease in the seat and route availability. By contrast, should Donald Trump win the election, it is much less likely for the DOJ to intervene, as his administration demonstrated little interest in responding to the rise of airline mergers and the negative effects they have on passengers.[xvii]
[i] See Niraj Chokshi, JetBlue and Spirit Announce Plan to Merge, Creating Fifth-Largest U.S. Airline, N.Y. Times (July 28, 2022), https://www.nytimes.com/2022/07/28/business/jetblue-spirit-merger.html (“The deal, which values Spirit at $3.8 billion, would create the nation’s fifth-largest airline, with a share of more than 10 percent of the market, behind United Airlines, which has a nearly 14 percent share. Delta Air Lines and Southwest Airlines control more than 17 percent each, while American Airlines has more than 18 percent.”).
[ii] U.S. v. JetBlue Airways Corp., No. 23-10511-WGY, 2024 WL 162876, at *2 (D. Mass. Jan. 16, 2024).
[iii] See id.
[iv] Id. at *3.
[v] Complaint at 3, JetBlue Airways Corp., 2024 WL 162876.
[vi] JetBlue Airways Corp., 2024 WL 162876, at *6.
[vii] See id. at *38.
[viii] Id. at *27.
[ix] Id. at *29.
[x] David Shepardson & Aatreyee Dasgupta, JetBlue, Spirit Airlines Call off $3.8 Bln Merger on Antitrust Hurdle, Reuters (Mar. 4, 2024, 8:49 PM), https://www.reuters.com/markets/deals/jetblue-terminates-38-bln-spirit-deal-2024-03-04; JetBlue Announces Termination of Merger Agreement with Spirit, Bus. Wire (Mar. 4, 2024, 8:30 AM), https://www.businesswire.com/news/home/20240304760258/en/.
[xi] See The Associated Press, Alaska Airlines to Buy Hawaiian Airlines in Deal that May Face Regulator Scrutiny, NPR (Dec. 3, 2024, 6:28 PM), https://www.npr.org/2023/12/03/1216870386/alaska-airlines-to-buy-hawaiian-airlines.
[xii] See Alaska Airlines-Hawaiian Would Have 40% of Hawaii-Mainland US Capacity but Compete on Just 12 Routes, Air Service One (Dec. 12, 2023), https://airserviceone.com/alaska-airlines-hawaiian-would-have-40-of-hawaii-mainland-us-capacity-but-compete-on-just-12-routes.
[xiii] Leslie Josephs, Why the JetBlue-Spirit Antitrust Ruling Doesn’t Spell Doom for an Alaska-Hawaiian Merger, CNBC (Jan. 19, 2024, 9:30 AM), https://www.cnbc.com/2024/01/19/jetblue-spirit-ruling-alaska-hawaiian-merger.html.
[xiv] Alaska Airlines-Hawaiian Would Have 40% of Hawaii-Mainland US Capacity but Compete on Just 12 Routes, supra note 12.
[xv] Josephs, supra note 13.
[xvi] JetBlue Airways Corp., 2024 WL 162876, at *15.
[xvii] See U.S. Airline Mergers and Acquisitions, Airlines for Am. (Jan. 16, 2024), https://www.airlines.org/dataset/u-s-airline-mergers-and-acquisitions/ (outlining how during the Trump Administration, there were three successful airline mergers—ManaAir and ExpressJet, Southern Airways and Mokulele Airlines, and Southern Airways and Air Choice One—none of which faced any resistance from the DOJ).
