Justice Dept. Sues to Block JetBlue’s Acquisition of Spirit

“Approximately 75 percent of JetBlue’s total capacity is tied up in the Northeast Alliance,” the Justice Department said in the suit. “That means JetBlue today coordinates its capacity decisions and shares its revenues with American Airlines on the vast majority of its flights. In other words, JetBlue no longer competes with American Airlines on those flights — and if this acquisition happens, Spirit won’t either.”

The Justice Department said on Tuesday that it would have sued to block the Spirit acquisition whether or not the Northeast Alliance was in place.

While JetBlue offers affordable ticket prices, Spirit offers even cheaper fares, making it a bigger threat to large airlines at the airports it serves, the department argued. Spirit is considered an “ultra low cost carrier,” a type of airline that works hard to keep costs and fares much lower than those of most airlines. Spirit stands out among those carriers because it more frequently challenges the big four airlines at their hub airports, the Justice Department said.

JetBlue has said that it plans to remove seats from Spirit’s densely packed planes to match its own configuration, which antitrust officials argue would make it difficult to keep costs and fares as low as Spirit has.

To make money, Spirit charges fees for a wide range of services that other airlines offer at no cost. These can include printed boarding passes at airport kiosks. That approach has frustrated many customers, but it has helped Spirit grow fast by attracting the most price-sensitive travelers, the Justice Department said.

The acquisition would substantially reduce competition on more than 150 routes that are flown by more than 30 million passengers every year, the Justice Department said. Those flights generate about $6 billion in annual revenue for all airlines. Along some of those routes, including some connecting Florida and Puerto Rico, JetBlue and Spirit are the only airlines that offer a significant number of flights, meaning the merger would grant JetBlue a virtual monopoly on those routes.

JetBlue has promised to give up Spirit’s holdings in New York, Boston and Fort Lauderdale, Fla., but that isn’t enough to address concerns about competition, the Justice Department said.

JetBlue, which had to outbid Frontier Airlines to secure a deal with Spirit, has said that it expects to close the acquisition in the first half of next year.

Sumber: www.nytimes.com

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