Closing arguments concluded today in a trial that will determine whether JetBlue and Spirit Airlines will merge. Although U.S. District Judge William Young carefully guarded his words, his statements suggest a compromise of more slot divesture could lead to approval of the merger.
Will Judge Approve JetBlue – Spirit Merger With More Concessions?
After four weeks of trial, opposing sides made their closing arguments today in a lawsuit that pits the US Department of Justice (DOJ) against JetBlue and Spirit Airlines, which are seeking to merge.
The arguments were familiar:
- US DOJ: The merger would harm consumers by eliminating Spirit Airlines, a carrier that forces other carriers to lower their prices when competing the same market
- “The fact is ULCCs as a flock are too small to make up for the loss of Spirit, which is 50 percent bigger than Frontier Airlines”
- JetBlue: A combination of the two carriers would benefit travelers by creating a formidable challenger to the four carriers (American, Delta, Southwest, United) that currently dominate the domestic market
- “JetBlue has been a 20-year maverick in this industry and is going to continue to be a disruptor going forward. The whole premise of this merger is that we want to go out and compete broadly.”
The decision now rets in the hands of Judge Young, an appointee of Ronald Reagan, the first time an airline has challenged a US government decision to block a merger.
How will he rule? Judge Young gave us some clues today:
- He told the DOJ attorney, “We’re not going to get anywhere if you win, the merger isn’t approved and Spirit goes belly up.”
- But he told JetBlue’s attorneys that fares would inevitably rise without Spirit Airlines presence in the market to “undercut everyone else.”
- Even so, he told the DOJ that he had “trouble” with the petition for a permeant injunction against a merger in a “dynamic industry facing unique opportunities and challenges in the post-COVID environment.”
- He also asked the DOJ it was possible to say that “with some more divestitures it might work.”
- DOJ attorneys responded that “there does not seem to be a remedy other than a full-stop injunction that would restore competition.”
Even though he cautioned the courtroom not to read into his own statements concerning how he would rule, we cannot help but to do so and it seems to me that Judge Young may be prepared to allow the merger to proceed if JetBlue and Spirt are willing to divest more slots.
Already, JetBlue has agreed to sell gates and/or slots in:
- Boston (BOS)
- Fort Lauderdale (FLL)
- New York (LGA and JFK)
- Newark (EWR)
The trial is over between JetBlue and the Department of Justice, with Judge Young now the sole decisionmaker as to whether this merger can proceed. If I was a betting man, I would say that this merger will be allowed to proceed with more slot concessions, but we may not know for several days or even weeks.
image: Civil Jury Project