Jet Blue won the Battle of Spirit. Now she has to win Biden’s Department of Justice

JetBlue Airways has finally won over Spirit Airlines with a $3.8 billion takeover deal. Now you need to win over the antitrust regulators.

The New York-based airline snatched Spirit Airlines from Frontier Airlines with an all-cash offer that torpedoed the cash-and-stock deal the two discount airlines struck earlier this year. Hours after Spirit and Frontier announced they had ended a merger agreement that lacked shareholder support, Spirit said it had agreed to sell itself to JetBlue.

JetBlue said it expects to receive regulatory approval in the last quarter of next year or the first three months of 2024. The carriers expect the deal to close in the first half of 2024.

If organizers check out, it would mean the end of Spirit, a brand that has become a keyword around the indignities of discount air travel, as passengers trade amenities like regular legroom, snacks and free cabin baggage for a cheap fare.

Will regulators allow an ultra-low-cost airline to suck up during the hottest period of inflation in decades and reshape it into the image of JetBlue, much like the big airlines?

The regulatory hurdle is high. President Joe Biden’s Justice Department has pledged to rule out any deals that might harm competition. Last year, it sued to block JetBlue’s alliance with American Airlines in the Northeast. The trial is scheduled to begin in late September.

JetBlue is optimistic. The Justice Department lawsuit claims America can beat JetBlue and says the alliance, which allows America and JetBlue to coordinate routes at busy airports serving New York and Boston, amounts to a “virtual merger.”

JetBlue CEO Robin Hayes said the merger of Spirit and JetBlue, which would become the nation’s fifth-largest airline, would create a strong competition for the big four US airlines: American, Delta, United and Southwest. After more than a decade of merging, those companies control nearly three-quarters of the US market.

“The best thing we can do to make the industry more competitive is to have a true, low-cost, high-quality national airline to compete on a larger national scale with these old airlines,” Hayes said in an interview. “By integrating JetBlue and Spirit together, we can do this much more quickly than we would on our own.”

The American declined to comment. The Justice Department did not immediately respond to a request for comment, but the acting head of antitrust, Jonathan Kanter, pledged a tough anti-competition stance.

“It is no secret that many settlements have failed to maintain competition,” Kanter said in a speech in Chicago in April. “Even abstractions may not fully sustain competition across all its dimensions in a dynamic market.”

The Justice Department has signed off on airline mergers, though not without some legal battles. For example, the merger of American Airlines and US Airways was approved in 2013 at the end of that year after the circuit sued to stop the deal.

John Lopatka, a law professor who specializes in antitrust law at Pennsylvania law, said JetBlue and Spirit will likely be required to withdraw some of their assets in the process.

Without it, “there would be a public perception that [the Justice Department] Just give up.”

Regulators will study staggered fares and routes, particularly in places like Florida where there are large airline operations.

“I think they’re facing a lot,” Lopatka said of JetBlue and Spirit. “I think there is almost no chance that they will be able to finish the merger without some compromise.”

The Department of Transportation, which will also need to sign, did not immediately comment.

Airlines have come under scrutiny this year from prominent lawmakers including Senator Bernie Sanders, as passengers have faced an increase in flight cancellations and delays, driven in part by a staff shortage.

Senator Ed Markey, a Democrat who represents Massachusetts, said in a statement that he has had major surgery.

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