By Nate Raymond and David Shepardson
BOSTON (Reuters) -A federal judge on Tuesday blocked JetBlue Airways’ planned $3.8 billion acquisition of ultra-low cost carrier Spirit Airlines after agreeing with the U.S. Department of Justice the deal would reduce the availability of low-priced air tickets.
The ruling by U.S. District Judge William Young in Boston marked a victory for the Biden administration in its efforts to preserve competition among the lowest cost airlines to ensure that air travel remains affordable for more U.S. consumers and raised doubts about another recently proposed deal.
Young said the proposed merger “does violence to the core principle of antitrust law: to protect the United States’ markets – and its market participants –from anticompetitive harm.”
Young also wrote: “The consumers that rely on Spirit’s unique, low-price model would likely be harmed.”
Spirit shares tumbled 60%, while Jet Blue shares fell 5% after the ruling.
The companies could still appeal the ruling. The airlines and Justice Department did not immediately respond to a request for comment.
The decision has implications for Alaska Air’s deal to buy Hawaiian Airlines. Analysts had said that a favorable ruling in the JetBlue-Spirit case for the U.S. Department of Justice would make it more challenging for Alaska to close its transaction.
Alaska’s shares were down 3%, while Hawaiian shares were flat.
The Justice Department, along with Democratic state attorneys general from six states and the District of Columbia, had argued the JetBlue-Spirit deal would lead to fewer flights and higher prices for millions of Americans.
They said that allowing JetBlue to absorb its no-frills, budget rival Spirit would “extinguish a vital source of low cost competitive disruption along more than 375 routes,” causing nearly $1 billion of net harm annually to consumers.
JetBlue’s lawyers argued that the case was a “misguided” challenge to a merger between the nation’s sixth- and seventh- largest airlines, which combined control less than 8% of a domestic market dominated by four larger airlines.
Those four U.S. carriers – United Airlines, American Airlines, Delta Air Lines and Southwest Airlines – control 80% of the market following a series of previous airline mergers that the federal government blessed.
Spirit was the first U.S. domestic carrier to allow passengers to pick what features of their flights they pay for, such as checked bags and food and drink service. Its model has pushed competing airlines to slash prices, the Justice Department said.
JetBlue is a higher-cost airline than Spirit. But it has historically maintained a low-cost model compared with larger airlines and been able to similarly pressure larger airlines to reduce prices when it enters a new route.
(Reporting by Nate Raymond in Boston, David Shepardson in Washington and Rajesh Kumar Singh in ChicagoEditing by Alexia Garamfalvi, Anna Driver and Matthew lewis)
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