There was good news Tuesday for fans of Spirit Airlines, the only regularly scheduled carrier at Atlantic City International Airport and one of just two ultra-low-cost airlines in the nation.
A federal judge rejected the ill-conceived attempt by JetBlue Airways to take over Spirit in a merger, saying it would have reduced airline competition and hurt travelers who rely on Spirit’s low fares.
U.S. District Judge William Young, of the U.S. District Court for the District of Massachusetts, spoke directly to South Jersey fliers who have taken advantage of the airline’s rock bottom no-frills airfares for years. He wrote in his ruling, “Spirit is a small airline. But there are those who love it. To those dedicated customers of Spirit, this one’s for you.”
The U.S. Justice Department had sued a year ago to stop JetBlue’s acquisition of Spirit, saying it would remove an ultra-low-cost carrier that puts pressure on airlines to keep down fares. Young agreed and said, “The airline industry is an oligopoly that has become more concentrated due to a series of mergers in the first decades of the twenty-first century, with a small group of firms in control of the vast majority of the market.”
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In February 2022, Spirit and the nation’s other ultra-discount carrier, Frontier Airlines, had announced a plan to combine into a stronger and worthier challenger to the four major US. airlines. We welcomed the proposal, saying it likely also would give Atlantic City International Airport connections to more destinations, fares among the lowest in the industry, and encourage more visitors to fly to the resort city.
But JetBlue saw Spirit as a path out of its troubles and toward becoming a fifth major airline. JetBlue spent lavishly to buy the support of Spirit shareholders and its corporate officers. Money talked for shareholders and the best business deal for Spirit Airlines and its South Jersey customers walked away.
Industry analysts from the start said the Justice Department’s case against JetBlue looked strong, so an appeal of Tuesday’s ruling looks unlikely, let alone a successful one. The U.S. already had sued JetBlue and American Airlines over their partnership in the Northeast market. Last year, a judge ruled the partnership limited competition and ordered them to end it.
JetBlue Chief Executive Robin Hayes, who led the attempted takeover of Spirit, previously had tried and failed to buy Virgin America. Last week he said he would resign in February.
The failure will cost JetBlue. It had agreed to pay Spirit shareholders a breakup fee of $400 million if it couldn’t get antitrust approval, and another $70 million to Spirit Airlines.
Unfortunately, the misguided takeover and the pandemic have left Spirit weakened. Major airlines desperate to replace their lucrative business travelers who haven’t returned since the pandemic have added routes and cut their fares to take business from low-cost rivals. Spirit hasn’t been profitable since the pandemic and will need to refinance its debt.
A representative for Spirit on Wednesday told The Wall Street Journal, “we are confident in our strengths and strategy. Spirit has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations.” Analysts at JPMorgan Chase acknowledged that they “cannot reasonably identify a viable return to profitability any time soon.”
This turbulence was not Spirit’s fault. We hope it can navigate through this period to when its deep discount airfare model will succeed again. We’d like eventually to see a tie-up with Frontier Airlines considered again. Combining the ultra-discounters could give fliers throughout the nation a break and keep the major airlines “oligopoly” from excessive profiteering.