What has lengthy been anticipated might very properly change into reality by the point you learn this. Bloomberg is reporting that as quickly as as we speak, the Division of Justice (DOJ) will sue to dam JetBlue’s acquisition of Spirit on anti-trust grounds. Extra shockingly, Bloomberg says the Division of Transportation (DOT) will “start a parallel continuing to dam the switch of Spirit’s airline working certificates as incompatible with the general public curiosity.” That might be fairly the transfer, and it will not bode properly for JetBlue.
I’m doing my finest to chorus from commenting immediately on these strikes since they haven’t really occurred but. As a substitute, I wish to take a look at the place that JetBlue has taken over the previous couple of months. It looks as if a tortured narrative that talks previous the actual considerations prone to come out of the federal authorities.
From the federal perspective, we’ll be taught extra specifics within the coming days. However the argument I’d make is that Spirit is an extremely low value service (ULCC) and JetBlue will not be. JetBlue taking up Spirit will lead to larger fares on Spirit routes and can damage service choices in lots of markets, particularly Florida the place the 2 airways have a number of overlapping focus cities.
On the JetBlue facet, you might have a extra advanced narrative. The Blue Crew says that the large 4 have an excessive amount of energy and wish decrease fare competitors. Permitting JetBlue to purchase Spirit will allow JetBlue to realize the dimensions it must lastly struggle these large, dangerous legacy airways, bringing decrease fares than the large guys to clients and offering competitors in these markets. It actually doesn’t handle what the elimination of a structurally decrease value airline like Spirit would imply for Spirit vacationers, as a result of properly, that in all probability doesn’t look so nice.
To help this place, JetBlue has been going deep to attempt to sway opinions. Figuring out Florida was a giant concern, JetBlue summoned some spectacular political wizardry to put out a press launch stuffed with reward for the airline from proper (Gov Ron DeSantis) to left (Rep Debbie Wasserman Schultz).
JetBlue not solely introduced it will begin flying the Tallahassee – Fort Lauderdale route — a assured money-loser however one which those that have to control from Tallahassee will vastly respect —nevertheless it additionally stated it will enhance the mixed airways’ flying from Fort Lauderdale from practically 150 departures as we speak (about 55% of which is from Spirit) to greater than 250.
It’s completely unclear how the present plan for the bodily footprint at FLL will help this, but when the airport could make it occur, then JetBlue says it’ll fly the airplanes. Not solely will it fly them, however it would fly them to 30 new locations — examples embrace Antigua, Belize, Cincinnati, Liberia (CR), Minneapolis/St Paul, Memphis, and Savannah together with new Transatlantic flying. It would additionally enhance flying on 30 present routes.
Florida is pleased with this, judging by the glowing quotes within the launch, however the feds matter most. It appears very clear that the feds aren’t shopping for it.
Presumably seeing the writing on the wall, JetBlue yesterday lobbed a final second hail mary with a brand new press launch full of study that “provides to a compelling rationale for JetBlue-Spirit mixture.”
What’s so compelling? I’m glad you requested. The details are:
- JetBlue is over 3x simpler than Spirit at bringing down competitor fares.
- JetBlue and Spirit primarily compete with different carriers not one another.
- Proposed divestitures materially scale back restricted overlap.
- ULCCs are rising quickly and have expressed excessive demand for divested belongings.
- The mix of JetBlue and Spirit plus the fast development of ULCCs will guarantee elevated competitors and low fares.
JetBlue is once more actually attempting to focus consideration on how dangerous the large 4 are and the way good JetBlue and Spirit shall be at competing with them.
JetBlue LOVES to speak in regards to the so-called JetBlue Impact which suggests airways deliver their fares down when JetBlue enters a market. And now, JetBlue says that it’s thrice simpler at doing that than Spirit. That could be the case, however what does it say for all these passengers who paid all-time low fares to fly Spirit?
These individuals aren’t going to care if fares are decrease than these of the large guys if the fares are nonetheless larger than what they paid on Spirit. And fares on the brand new JetBlue need to rise from Spirit ranges as a result of a) they received’t use an a la carte mannequin and b) the seat prices of a JetBlue operation are only a lot larger than at Spirit.
To counter this downside, JetBlue says that it’ll divest a bunch of belongings which different ULCCs will gladly take and use to exchange the misplaced ULCC capability. It’s true that JetBlue has stated it would divest all of Spirit’s holdings in New York and Boston together with some in Fort Lauderdale. This was an excellent, proactive step in attempting to curry favor with the feds, however what’s going to ULCCs do with it?
From a ULCC perspective, Spirit tends to serve the larger markets with extra frequent service than anybody else. Frontier is the one airline that appears poised to even attempt to step into that function, however even that’s not a certain factor. All of the remaining ULCCs are likely to serve smaller markets occasionally. Simply saying that competitors will return when different airways choose up divested belongings appears flimsy to me.
Consider it this fashion. This month, Spirit is flying 4x each day from LaGuardia to Fort Lauderdale. Frontier doesn’t fly that route, however perhaps it provides a each day flight. No different ULCC is prone to fly that route, so likelihood is that low fare seats will undergo. Possibly Breeze picks up a slot and flies to Vero Seaside. Or perhaps Allegiant decides to go in and fly to Pittsburgh. I can’t say I do know what they’d do, nevertheless it in all probability wouldn’t appear like what Spirit does as we speak.
Plainly JetBlue is admittedly attempting to make the one argument that it will probably make… placing ahead its place in relation to the large guys. However DOJ and DOT apparently aren’t going to take a look at it that means and have actual considerations in regards to the elimination of a big, very low fare competitor in all of this.
I’ll have extra to say when this really occurs, however assuming the Bloomberg report is right, JetBlue goes to seek out itself in a really powerful spot.