OPINION:
The next destination for Spirit Airlines may be bankruptcy. The scrappy low-fare carrier denies it, but experts see this as the likely way out from billions in debt. You can thank the Biden administration and a federal judge in Massachusetts for this unfortunate state of affairs.
Last week, U.S. District Judge William G. Young sided with the Justice and Transportation departments in deciding to shoot down the proposed merger between JetBlue Airways and Spirit. These low-cost aviation underdogs intended to unite their strengths to become a more disruptive force in the marketplace, better able to force the likes of American, Delta and United to up their game — and lower their fares — to compete.
Those big players stopped worrying after Transportation Secretary Pete Buttigieg announced his intention to invoke antitrust laws to block the deal. “We can use this authority to combat anti-competitive practices that fall outside of antitrust laws,” he said in a speech, “and do so at their incipiency, before the negative impact ripples across the market.”
It’s a bit unclear how allowing the nation’s sixth-largest airline to combine with the seventh-largest could possibly create a monopoly worthy of invoking trust-busting power. There are a lot of ways to measure an airline’s strength, but a good place to start is the size of its jet fleet.
JetBlue operates 280 aircraft, and Spirit has 202, for a total of 482 combined. American, Delta and United have an average of 960 jets each. A merged JetBlue-Spirit would still be half the size of any of the three big players.
That’s why American, Delta and United are relieved. They realize they won’t have to improve service to stay competitive. From their own history, they know relative newcomers grow into major players through mergers. Famous names from the past such as Continental, Northwest, TWA and US Airways faded from memory as they were folded one by one into the American, Delta and United we know today.
When airlines join forces, they gain access to three critical and difficult-to-acquire resources: pilots, airplanes and landing slots at key airports. By integrating those resources, Spirit and JetBlue would have more national reach. The deal made even more sense as both companies made the same decision to keep costs down by flying one type of long-haul jet from Airbus. This means pilots and mechanics wouldn’t need to go through the expensive process of learning to deal with multiple systems.
Of course, the biggest winner in a blocked merger isn’t the incumbent airlines, it’s the Transportation Workers Union, which a year ago wrote to inform Mr. Buttigieg and Attorney General Merrick Garland of “the possibility that hard-fought collective bargaining agreements — which also enhances customer experience — may be at risk” from the JetBlue-Spirit deal.
Labor bosses would rather see a company go down under the weight of bloated union contracts than see their influence diminish in a reformed company with the strength required for survival. And when unions call, the administration answers — even if that sends “negative impact ripples” across the market or increases costs for consumers.
Please read our comment policy before commenting.