US judge blocks JetBlue from acquiring Spirit Airlines By Reuters

By Nate Raymond, David Shepardson and Rajesh Kumar Singh

BOSTON (Reuters) -A federal judge on Tuesday blocked JetBlue Airways (NASDAQ:)’ planned $3.8 billion acquisition of ultra-low cost carrier Spirit Airlines (NYSE:) after agreeing with the U.S. Department of Justice that the deal would reduce the availability of low-priced air tickets.

The ruling by U.S. District Judge William Young in Boston marked a victory for the Biden administration in its efforts to prevent further concentration in the U.S. airline industry and is expected to make it harder for Alaska Air (NYSE:) to close its deal to buy Hawaiian Airlines.

It also raises questions about Spirit’s future. The ultra-low-cost carrier has been struggling to turn a profit amid a run-up in operating costs and persistent supply chain problems.

Spirit shares tumbled 52%, while JetBlue shares were up 2.5% on Tuesday afternoon.

The companies could still appeal the ruling. JetBlue said it is reviewing the court’s decision. The Justice Department did not immediately respond to a request for comment.

Young said the proposed merger “does violence to the core principle of antitrust law: to protect the United States’ markets – and its market participants – from anticompetitive harm.”

Young also wrote: “The consumers that rely on Spirit’s unique, low-price model would likely be harmed.”

He said, however, that his injunction “narrowly applies only to the proposed merger of JetBlue and Spirit as it currently stands.”

The judge, who at trial had questioned whether further asset divestitures would allow the deal to pass muster, declined the Justice Department’s request to bar any combination of the companies.

The Justice Department, along with Democratic state attorneys general from six states and the District of Columbia, had argued the JetBlue-Spirit deal would lead to fewer flights and higher prices for millions of Americans.

They said that allowing JetBlue to absorb its no-frills, budget rival Spirit would “extinguish a vital source of low cost competitive disruption along more than 375 routes,” causing nearly $1 billion of net harm annually to consumers.

JetBlue’s lawyers argued that the case was a “misguided” challenge to a merger between the nation’s sixth- and seventh- largest airlines, which combined control less than 8% of a domestic market dominated by four larger airlines.

Those four U.S. carriers – United Airlines, American Airlines (NASDAQ:), Delta Air Lines (NYSE:) and Southwest Airlines (NYSE:) – control 80% of the market following a series of previous airline mergers that the federal government blessed.

“This is an enormous victory for travelers, workers, and local communities,” said William McGee, senior fellow for aviation and travel at the American Economic Liberties Project.

Spirit was the first U.S. domestic carrier to allow passengers to pick what features of their flights they pay for, such as checked bags and food and drink service. Its model has pushed competing airlines to slash prices, the Justice Department said.

JetBlue is a higher-cost airline than Spirit. But it has historically maintained a low-cost model compared with larger airlines and been able to similarly pressure larger airlines to reduce prices when it enters a new route.

The New York-based airline had tried to address U.S. regulators’ concerns by agreeing to divest gates and slots at key airports in New York City; Boston; Newark, New Jersey; and Fort Lauderdale, Florida.

The Justice 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.