Justice Department sues to block JetBlue's proposed Spirit Airlines acquisition

© Reuters.

By Sam Boughedda

The Justice Department has filed an antitrust lawsuit to block JetBlue Airways' (NASDAQ:JBLU) proposed $3.8 billion acquisition of ultra-low-cost rival Spirit Airlines (NYSE:SAVE).

After a long battle between JetBlueFrontier Airlines to acquire Spirit, the low-cost carrier agreed to sell itself to JetBlue last summer. However, the acquisition faced challenges from regulators from the start. On Monday, JetBlue said it expected to "get sued by the DOJ this week."

"JetBlue and Spirit compete fiercely today on hundreds of routes serving millions of travelers," the U.S. Department of Justice said in its press release. "By eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely."

The complaint was filed in the District of Massachusetts and claimed Spirit's low-cost, no-frills option has resulted in lower fares and more route options across the country, "making it possible for more Americans – particularly price-sensitive consumers who pay their own fares – to travel."

They state that Spirit's presence in the market forces other air carriers to lower their fares.

"Our complaint alleges that JetBlue's proposed $3.8 billion acquisition of Spirit violates Section 7 of the Clayton Act," said Attorney General Merrick Garland. "If allowed to proceed, this merger will limit choices and drive up ticket prices for passengers across the country."

Reacting to the lawsuit, JetBlue and Spirit Airlines said in a joint statement that they will continue with their plan to "create a compelling national challenger to the Big Four airlines, which control about 80% of the market after years of industry consolidation that the DOJ itself approved."

"We believe the DOJ has got it wrong on the law here and misses the point that this merger will create a national low-fare, high-quality competitor to the Big Four carriers, which – thanks to their own DOJ-approved mergers – control about 80% of the U.S. market," said JetBlue CEO Robin Hayes. "There is too much at stake for the DOJ to prevent us from bringing the JetBlue difference to more customers in more markets."