A previously reported story that JetBlue mistakenly failed to redact key information suggesting post-merger Spirit Airlines fares would rise 40% was inaccurate. It was the plaintiffs who are suing to block the merger who made such a claim.
JetBlue: No Smoking Gun That Fares Will Be 40% Higher Post-Merger
Underscoring what a big issue this is, three different people reached out from JetBlue to provide clarification on the matter. One told me, “Court documents are a filing from the plaintiff’s attorney, not JetBlue, and the plaintiffs are saying we would raise fares (JetBlue isn’t saying that). And, the comments that were to be redacted in the court filing are all the plaintiff’s interpretations of evidence, not direct quotes or evidence from JetBlue documents or evidence we provided.”
Here is JetBlue’s official statement:
Unfortunately, following a filing error by the legal team for a group of consumers that has filed a baseless lawsuit, we are in a position where we need to correct the record.
To be very clear, the claims reported by several media outlets did not reflect facts set out in JetBlue documents. Private plaintiffs represented by the merger class action lawyer, Alioto, in a the court filing laying out their arguments opposing our motion for summary judgment, incorrectly redacted sections of text so that it could be read by cutting and pasting into a new document.
As we attempted to clarify yesterday, it is important to understand that the redacted text was content written and produced by Alioto in their own court filing, not redactions to JetBlue internal documents. These redactions were in text where Alioto had outlined, in their own words, their argument to the court, and essentially represents the plaintiff’s “spin” on confidential evidence they have reviewed. It’s no surprise a class action attorney would mispresent the facts in a brief to the court to preserve their case.
The factual evidence, when presented in a full and complete picture, will demonstrate that JetBlue intends for the merger with Spirit to increase competition and help lower fares across the board while also bringing JetBlue’s high-quality and much-loved experience to millions more travels.
We hope this clarifies the story and are glad to see that JetBlue was not foolish enough to put in writing that fares would rise to this extent post-merger. Even factoring in lower ancillary fees on JetBlue that translate to higher base fares, I still do not expect the super cheap fares that travelers packing lightly have been able to take advantage of, will survive. The question of how much fares will rise remains unanswered.
The original story, which has proven inaccurate, appears below.
JetBlue has made an unforced error in failing to redact information suggesting it forecasts fares of up to 40% higher on Spirit Airlines planes post-merger. This may simply be an official confirmation of what was already obvious, but it still will hurt efforts to complete the merger.
JetBlue Admits What We Already Knew: Fares Will Rise After Spirit Merger
JetBlue not only faces government scrutiny over the planned merger with Spirit Airlines, but also faces a civil lawsuit from Spirit customers claiming JetBlue’s proposed acquisition would “substantially lessen competition and create a monopoly in the passenger airline industry.” During the process of discovery, JetBlue’s lawyers failed to redact a key piece of information:
Those details show that in mapping out the merger’s impacts on its revenues, JetBlue Airways Corp. “modelled for price increases and capacity reductions” by removing an average of 24 seats “from every one of Spirit’s roughly 200 planes.”
“Indeed, JetBlue plans to increase fares on aircraft it acquires from Spirit by at least 24%,” the travelers said in one section that was supposed to be redacted. And, according to the redacted text, JetBlue believes that number “is a conservative estimate, and that fare increases may be as high as 40%. … Thus, there is direct evidence in the form of party admissions that the merger will have anticompetitive effects.”
Documents from JetBlue also reveal perhaps an even more critical matter in terms of the merger’s effect on competition: prices on routes in which Spirit exits will typically rise by 30%:
“JetBlue acknowledges that Spirit’s exit from a route results in market-wide price increases of all other airlines serving that route by 30%.”
This makes it harder for JetBlue to claim that the merger does not impact other passengers, regardless of the carrier they choose.
JetBlue now asserts these figures are taken out of context:
“Private plaintiffs’ counsel failed to properly redact certain information which, taken out of context, creates a completely inaccurate picture of the facts. We are confident that our merger with Spirit will give a much-needed boost to airline competition in the U.S. and result in more low fares and higher-quality service for customers. We look forward to laying out all of the evidence to support our case this October.”
In JetBlue’s defense, Spirit Airlines fares are very low, but often deceptively low considering they are totally unbundled. If fares are 40% higher post-merger but include the sort of things that consumers would purchase anyway, then the difference is more muted.
But unlike One Mile At A Time, I do not necessarily agree that “Spirit nickels and dimes for everything, while JetBlue doesn’t.” JetBlue does provide complimentary non-alcoholic beverages, snacks, and wi-fi onboard and that’s a big deal. But on its lowest fares it does not include a carry-on bag or checked bag (just a personal item) and that is no different than Spirit and likely the primary source of ancillary revenue.
Furthermore, for those passengers who are able to travel light or do not mind the extras, fares are typically quite low on Spirit. And when other carriers match Spirit’s pricing, all travelers win. It’s not my favorite business model, but Spirit has been historically profitable so to say that the Spirit way creates unsustainably low fares is not convincing. JetBlue’s “half-in, half-out” model of going beyond full-service carriers in some areas and not in others has created a business model that appears unsustainable (at least based on the lack of profit).
Sure, the talking head politicians will seize on this for a “gotcha” moment for re-election soundbites, but the idea that this merger is good for customers (which should be a separate issue from whether the merger should legally be allowed) is certainly not clear.
JetBlue has made its job harder thanks to a sloppy job of redacting by its attorneys. While this information may have only confirmed what was already obvious, it does buck the narrative that JetBlue has repeated that its merger with Spirit will lead to lower fares. That appears increasingly to be unlikely, as JetBlue itself admits and regardless of what the overall or all-in fares might include.
(H/T: View From The Wing)