JetBlue Airways CEO Robin Hayes was unequivocal when asked what he’d do if the U.S. Justice Department blocked his airline’s proposed buyout of Spirit Airlines, South Florida’s low-cost hometown air carrier.
“We’re going to court,” he told an interviewer last week at The Economic Club of Washington, D.C., a nonprofit forum for global leaders.
The two airlines are facing an uphill battle against federal regulators who have suggested the government might sue to stop the deal. Lawmakers including Sen. Elizabeth Warren, D-Mass., urged the U.S. Departments of Justice and Transportation to intervene in the name of consumer protection. And JetBlue’s unionized flight attendants announced their opposition last Thursday, calling the deal a “disaster” for workers and consumers.
In the face of the resistance, the New York-based airline, with help from senior Spirit leadership, has mounted an aggressive campaign to rally political and business support for the $3.8 billion deal approved by Spirit shareholders last October. The transaction would make the combined airline the nation’s fifth largest behind American Airlines, Delta Air Lines, Southwest Airlines and United Airlines, which control 80% of the U.S. market, according to industry officials.
Part of the JetBlue’s argument is that the government itself permitted the industry consolidation. So why should smaller carriers in search of more economic muscle be denied now?
“If you’ve got bullies in the school yard, you’ve got to let the others bulk up and defend themselves,” said Henry Harteveldt, president and co-founder of San Francisco-based Atmosphere Research, an industry consultancy.
“A merged JetBlue and Spirit would be very beneficial for South Florida because it would mean potentially more service in more places,” he said. “JetBlue and Spirit would be able to rationalize their schedules.”
In essence, the bigger merged airline would have more planes to redeploy around its system, subtracting flights from cities where there may be too many flights, and adding them to cities that lack service or might need more.
Appeal for local support
That type of flexibility is what JetBlue has in mind for Fort Lauderdale, where it has vowed to operate 250 daily flights by 2027, make full use of a new headquarters complex being built by Spirit in Dania Beach, build a maintenance hangar at the airport, and become a major tenant of a new five-gate Terminal 5.
“We have had good engagement with our communities about the benefits this transaction will enable,” the company said in a statement Friday. “This includes in Fort Lauderdale, where we received bipartisan support for our announcement that, together with Spirit, we will bring more than 250 daily flights to the airport, positioning it as an even more attractive alternative to Miami and supporting economic activity across the region.”
A public comment space on the U.S. Department of Transportation website contains more than 6,000 remarks from employees of both airlines and other individuals, most all of them urging approval of the deal.
On the night of JetBlue’s Feb. 15 expansion announcement, the company invited Broward County, city and state business leaders, and government leaders to a private gathering at Le Meridien Dania Beach at Fort Lauderdale Airport hotel for a briefing. Senior executives from both airlines were in attendance,
Bob Swindell, CEO and president of the Greater Fort Lauderdale Alliance, the county’s economic development arm, was among the guests. He told the South Florida Sun Sentinel that the visitors were asked to support the merger and said the alliance intends to do so as soon as the agency’s executive committee approves.
“We plan to enthusiastically support the merger,” Swindell said. “JetBlue wants the business community informed and aware of their commitment to South Florida.”
Swindell, whose agency counts aviation as a prime target industry for buttressing local employment and business activity, said he spoke with Hayes who “reiterated” the airline’s commitment to occupying a new airport terminal and building a maintenance hangar that would employ 80 to 100 well-paid technicians.
That an airline would have to wage a campaign to make a takeover happen is fairly anomalous for an industry that has undergone significant consolidation over the last two decades. Most major mergers have sailed through the government approval process.
JetBlue has sought to ease government antitrust concerns by offering to divest itself of Spirit assets in the Northeast and in Fort Lauderdale.
The carrier has publicly offered to offload all Spirit airport assets in the New York area and in Boston, as well as five airport gates at Fort Lauderdale where the two carriers combined lead all airlines in daily flights.
The assets would be made available to other ultra low-cost carriers such as Allegiant, Avelo, Breeze Airways or Frontier Airlines, the theory being that consumers would still have the option of flying out of the Northeast to Florida at discount prices after the deal takes place.
Breeze declined comment. Avelo did not respond to a request for comment. Both carriers are recent startups that fly to airports with historically limited service.
Many consumer advocates fear the loss of an ultra low-cost carrier such as Spirit would be bad for the traveling public in the form of rising fares and less service.
“The good news is that Frontier is a national coast-to-coast, ultra low-cost airline and has already made it clear it will do what it can to enter markets or expand in markets where it believes competitive opportunities will open up,” Harteveldt said.
Frontier, which many analysts believed would have been a better fit for Spirit, is the carrier that lost the bidding war for Spirit to JetBlue.
Thus far, JetBlue has not placed its Northeast marketing alliance with American Airlines on the table. The Justice Department is suing both carriers, claiming their arrangement dilutes competition. A ruling by a federal judge is pending.
Dr. Bijan Vasigh, business professor at Embry-Riddle Aeronautical University in Daytona Beach, noted that JetBlue and American are dominating in the Northeast.
Yet, he does not see the deal posing the competitive problems of prior mergers. “The only market I have looked at where it creates consolidation is Fort Lauderdale,” he said.
Mixed union backing
The merger last week won the support of Spirit’s 5,600 unionized flight attendants represented by the Association of Flight Attendants – C.W.A., after labor and management reached a tentative deal that includes pay raises and post-merger job protections.
“Flight attendants have flown Spirit to new heights over the last three years as we navigated the pandemic and a growing airline,” Jason Kachenmeister, the AFA Spirit president, said in a statement. “As we head into the merger, the agreement will bring increased pay and establish a clear path to continue raising the bar following the merger.”
But the Transport Workers Union, which represents 6,800 JetBlue attendants and 250 Spirit ground workers, is adamantly opposed.
In a letter sent Thursday to U.S. Attorney General Merrick Garland and Transportation Secretary Pete Buttigieg, the TWU warned “of significant harm to the traveling public and frontline airline workers should the two low-cost carriers combine.”
“We have yet to see a credible argument that a consolidated JetBlue/Spirit will enhance competition in the domestic airline industry,” the union said in its letter. “Workers and passengers will be harmed, just as they have been in many past airline consolidations, as the new airline follows the business practices, pricing strategies, and labor cost-cutting practices previous combined carriers have undergone. DOJ and DOT should not reward such behavior by approving yet another monopoly.”
The company did not respond to a request for comment..
But JetBlue has insisted it intends to preserve the jobs of workers from both carriers. Asked during the Washington interview how many workers might lose their jobs post-merger, Robin Hayes replied: “Zero.”
Decision in 30 days?
Hayes declared JetBlue has a lot going for it on the legal front should the government sue to stop the deal..
He said the newly combined airline would deliver lower fares in markets dominated by the larger Big Four carriers, while offering new service to underserved cities.
Asked when the government might make its decision known, Hayes replied: “Hopefully within the next month. We’ll see.”
“We’re focused on winning,” Hayes added. “We’ve got great facts. The law hasn’t changed. Everyone we meet really wants this to happen and we’re very confident in our case.”
The Justice Department did not respond to a written request for comment.
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