Today on TAP: The JetBlue buyout of low-cost Spirit Airlines faces certain action from Biden’s reinvigorated antitrust officials.
by Robert Kuttner
July 29, 2022
Wilfredo Lee/AP Photo
JetBlue is a wannabe fifth national major player in the U.S. airline wars.
JetBlue has made a $7.6 billion deal to buy low-price carrier Spirit Airlines. There is only one purpose to the deal—to raise fares and costs to consumers. JetBlue beat out a proposed merger between Spirit and another low-cost airline, Frontier. That would also have reduced head-to-head competition, but not as much.
As the Biden administration has increased antitrust enforcement via a revived Federal Trade Commission under Lina Khan and a newly vigorous Justice Department Antitrust Division led by Jonathan Kanter, government investigation and litigation to block this deal appears inevitable. The airline industry today has just four large airlines, Delta, American, United, and Southwest, the result of past mergers that were permitted by the indulgence of previous antitrust authorities, under Republicans and Democrats alike.
Together, those dominant carriers have 80 percent market share. There are ever fewer routes with competing airlines, and even on those that do have more than one carrier, the fares bear an uncanny similarity to one another.
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JetBlue, which does offer bargain fares on some routes, is a wannabe fifth national major player. If the merger with Spirit goes through, it would have about 9 percent market share. “Spirit is going to disappear, and with it, its low cost structure,” said William McGee of the American Economic Liberties Project. “Once Spirit is absorbed (into JetBlue), there is no question that fares are going to go up.”
The sheer gall of these airline executives is astonishing. JetBlue has already been sued by the Antitrust Division for its so-called “Northeast Alliance,” a so-called code-sharing deal with American that allows each carrier to sell seats on the other’s flights. In announcing that suit last September, Attorney General Merrick Garland said, “American Airlines’ ‘alliance’ with JetBlue is, in fact, an unprecedented maneuver to further consolidate the industry. It would result in higher fares, fewer choices, and lower quality service if allowed to continue.” Strong words from the usually circumspect AG.
The Justice Department’s complaint against that deal reflects a great deal of research, and goes into details that foreshadow a newfound concern about oligopoly pricing power in key industries. It’s about time. If we care about inflation, industry concentration is one good place to fight it.
Robert Kuttner is co-founder and co-editor of The American Prospect, and professor at Brandeis University’s Heller School.
July 29, 2022
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