BOSTON — A lawyer for JetBlue Airways said Tuesday that the largest U.S. airlines are using their size to cement their dominance in a post-pandemic world, making it critical that a federal judge allow JetBlue to buy Spirit Airlines.
The lawyer, Ryan Shores, said JetBlue needs Spirit to be a “viable challenger” to the four airlines that control most of the domestic aviation market.
“That mandate is even more urgent today,” Shores said during closing arguments in a federal court lawsuit over the U.S. Department of Justice's lawsuit seeking JetBlue's $3 purchase of Spirit, the nation's largest low-cost carrier. .8 billion to block.
A Justice Department lawyer argued that the deal would increase fares by 30% and leave fewer options for travelers on a budget.
Edward Duffy said that if JetBlue were to acquire Spirit, the share of ultra-low-cost airlines would drop by half – or 6 million fewer budget flights per year.
Duffy said JetBlue contradicted itself by stating that because of its smaller size it needs Spirit to grow fast enough to challenge the larger airlines, while also claiming that even smaller, low-cost rivals like Frontier Airlines would have no trouble growing quickly grow enough to replace the larger airlines. Spirit's presence in the market.
“And most tellingly, they have invited the court to look beyond the harm done to passengers who cannot pay for JetBlue's richer experience,” Duffy said.
There is no jury in the trial, which stretched over several weeks and included testimony from the CEOs of both airlines. No ruling is expected Tuesday from U.S. District Judge William Young.
During closing arguments, the judge bombarded attorneys for JetBlue and Spirit with questions. Young, who was nominated to the federal bench by President Ronald Reagan in 1984, said: “If the merger goes through, there will be some disruption. That is inevitable.”
The judge asked Shores how long it would take before consumers see the benefits JetBlue promises, such as increased competition with the larger airlines.
JetBlue's attorney suggested it could take two or three years, “after the market reaches post-merger competitive equilibrium.”
Before the trial began, JetBlue attempted to gain regulatory approval by agreeing to sell Spirit's gates and take-off and landing slots at airports in Boston and the New York City area and giving up some gates in Fort Lauderdale, Florida.
On Tuesday, the judge said he had “issues” with a permanent injunction that would block the merger in “a dynamic industry facing unique opportunities and challenges in this post-COVID environment.”
The judge asked both parties if there were other divestitures by JetBlue and Spirit that could make the merger acceptable.
Duffy, the Justice Department lawyer, tried to close the door on more divestments. He said the merger is so anticompetitive that nothing less than a full injunction against the deal would suffice. Shores, JetBlue's attorney, said any court-ordered remedies should be limited.
The government filed a lawsuit in March to block the deal.
The lawsuit is a new test for the Biden administration's fight against consolidation in the airline sector. Earlier this year, the Justice Department won an antitrust case and severed a partnership in New York and Boston between JetBlue and American Airlines.
The outcome of the current trial could reshape the field of so-called ultra-low-cost airlines, which charge low fares but charge higher fares than the traditional airlines that dominate the U.S. airline market. If Spirit is acquired by JetBlue, Frontier would become the largest discount airline in the US, followed by Allegiant Air and newcomers Breeze and Avelo.
JetBlue is the nation's sixth-largest airline by revenue, but would push Alaska Airlines to fifth place by buying Spirit.
On Sunday, Alaska announced a takeover of its own: It entered into a deal to acquire Hawaiian Airlines for $1 billion. The Justice Department has not indicated whether it will challenge that deal.
Previous administrations allowed a series of mergers that consolidated the industry to the point where four airlines – American, Delta, United and Southwest – control about 80% of the domestic aviation market. The Justice Department has filed lawsuits seeking concessions in some of those previous mergers, but JetBlue-Spirit is the first to go to trial.
Spirit agreed to merge with Frontier Airlines, which shares its ultra-low-cost business model, but JetBlue defeated Frontier in a bidding war.
Some Wall Street analysts have recently suggested that JetBlue is paying too much for Spirit, which is struggling to recover from the pandemic, and say it should renegotiate the deal. However, JetBlue has given no indication that it plans to do so. If it wins in court, JetBlue will nearly double its fleet, repaint Spirit's yellow planes and remove some seats to make them less cramped like JetBlue planes.
Shares of JetBlue fell 4% and Spirit fell 12% in trading on Tuesday.
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AP Airlines writer David Koenig contributed from Dallas.