Biden’s Dispiriting Antitrust Cops

In blocking a JetBlue-Spirit merger, they are reducing airline competition

WSJ editorial.

"The Justice Department this week won its suit to block an airline merger, and behold the Biden antitrust paradox. In the name of stopping business consolidation, the Administration’s trust busters are reducing competition.  

Spirit Airlines

’ stock price has fallen 63% since a federal judge on Tuesday blocked its merger with

JetBlue Airways

. The budget airline’s bonds traded Thursday at 52 cents on the dollar. Investors fear Spirit can’t stay in business on its own as it faces such headwinds as $1.1 billion in debt coming due next year, problems with its Pratt & Whitney engines, and a new labor agreement boosting pilot pay by some 34% over two years.

JetBlue’s $3.8 billion buyout offered Spirit a lifeline. It would have given JetBlue more pilots, airport gates and planes to better compete with the airline giants. The combined company would be the fifth largest U.S. carrier, though its market share (10.5%) would still trail Delta (17.7%), American (17.2%), Southwest (16.9%) and United (16.1%).

The tie-up would have made JetBlue a stronger competitor to the Big Four and thus benefitted most flyers. Frontier Airlines and Allegiant Air would continue to compete in the ultra-low fare space even in Spirit’s absence. It’s hard to see how the merger would harm consumers. Yet President Biden has ordered his antitrust cops to stop mergers no matter their benefits.

Justice said in its lawsuit that Spirit has boosted industry competition by unbundling services and offering ultra-low fares. Spirit customers can fly cross-country for less than $100, though they have to pay extra to bring a carry-on or select a seat in economy. They also get less legroom, and, sorry, no complimentary snacks or beverages.

Larger airlines have also unbundled prices and begun offering a no-frills economy option. Justice calls these “innovations.” But didn’t Mr. Biden call such extra charges “junk fees”? Justice’s lawsuit is riddled with similar contradictions.

Recall how Justice in 2021 challenged JetBlue’s alliance in the Northeast with American Airlines. In that lawsuit Justice argued that JetBlue spurred legacy carriers to cut fares. Now Justice contends that Spirit drove the price cuts, and that JetBlue will stop innovating if the two combine. Where’s the evidence?

The real risk is that Spirit won’t be able to offer ultra-low fares because it might no longer be in business. Spirit has run large losses since 2019 and recently raised $419 million by mortgaging some of its planes. Fitch downgraded its credit rating in October further into junk territory, citing economic pressure on its cost-conscious consumers and intense competition.

Federal Judge William Young acknowledged Spirit’s financial problems in his ruling. He also agreed that “an expansion of all aspects of JetBlue’s business—including network, fleet, and loyalty program—would allow for more vigorous competition with the Big Four, which carry most passengers in the country.” He nonetheless ruled that the merger violated the Clayton Act because it would eliminate one ultra-low fare option on some routes.

“Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you,” the judge declared. As for the millions of flyers who would have benefited from the merger, tough. The ruling subordinates the economic welfare of consumers to a misguided view of the market.

Justice has essentially set Spirit up for failure. If Spirit has to liquidate, as some Wall Street analysts warn, its assets would likely be acquired by larger carriers, helping solidify their dominance. Meantime, JetBlue will struggle to compete with the Big Four. Another great victory for the Biden antitrust cops."