A federal judge yesterday blocked JetBlue Airways from acquiring Spirit Airlines, ruling the $3.8B deal would have driven up fares for price-conscious travelers and hurt competition. Spirit's shares closed down 47% yesterday; JetBlue shares closed up 4.9%.
At trial, the US Justice Department had argued the merger would have limited flight options as well as the "Spirit effect," in which industrywide price reductions of 17% on average are triggered when Spirit reduces fares on specific routes. A JetBlue-Spirit merger would have created the fifth-largest airline in the US, giving the combined entity control of roughly 10% of the domestic market (see data). The four largest carriers—United Airlines, American Airlines, Delta Air Lines, and Southwest Airlines—control two-thirds of the US market. JetBlue and Spirit said they disagree with the ruling and are assessing next steps.
The DOJ previously forced JetBlue to dissolve a Northeast partnership with American Airlines that had allowed the two carriers to coordinate schedules and share revenue.