Can JetBlue’s Deal with Spirit Increase Competition and Consumer Benefits?

JetBlue Airlines made an unexpected $3.6 Billion bid to purchase Spirit Airlines this week, in a move that, some believe, could bring welcome competition to the airline industry and benefit consumers.

The airline industry has come a long way since the days of public ownership. Following the passage of the Airline Deregulation Act of 1978, the industry saw dramatic improvement in a variety of areas. These included everything from reduced rate fares, increased flight frequency, and more connecting flights, to a larger range of destinations and increased flight capacity. Major financial losses for taxpayers were also avoided when different airlines lost money or filed for bankruptcy.

Today, consumers have a variety of options to choose from when booking a flight, and each has its own benefits. Even so, the “Big Four” major airlines have a considerable amount of control over the industry. Together these four legacy airlines: American, Delta, United, and Southwest, control about 66% of the domestic market.

That is why any potential merger between rival airlines, whether that be Frontier and Spirit or now JetBlue and Spirit, could be a win for consumers. It has the potential to offer consumers a viable 5th option that can compete with each of the big four and potentially force them to reevaluate whether their current services are adequate to retain customers and preserve their market share.

In addition, such a deal could enable a company like JetBlue to greatly expand network operations and offer new benefits to customers such as more flight options and service to new destinations. JetBlue has already stated that the transaction would allow it to introduce flights to cities like St. Louis, Memphis, Louisville, Atlantic City, and Myrtle Beach. It also plans to grow operations in existing focus cities like Los Angeles, Fort Lauderdale, and Orlando. This increase in air travel would necessitate operating an expanded fleet, that when combined with Spirit, would include 455 aircraft with more than 312 on order. The majority of these would be fairly new and fuel efficient, allowing for further cost savings.

Consumers may also see other benefits like retrofitted aircraft interiors and better in-flight service.

JetBlue has further stated that, if the sale is approved, it is expected to deliver somewhere between “$600 and $700 million in net annual synergies” and produce “$11.9 billion in annual revenue based on 2019 estimates.” This is potentially a huge sum of money, much of which could be dedicated to improvements and passed onto consumers.

Despite the reported benefits resulting from the proposed merger, there are those who remain opposed to the proposition of a united JetBlue and Spirit airlines. The Biden Administration’s Justice Department in particular, has previously expressed skepticism over such deals, having gone so far as to file an antitrust lawsuit last September against JetBlue and American Airlines for their proposed partnership in the northeast.

However, actions such as these are frequently misguided, and often underestimate how much consumers could benefit from such consolidations.

JetBlue’s chief executive Robin Hayes has also pointed out that the new proposal would likely make the Justice Department’s main argument, that a JetBlue and American Airlines “Northeast Alliance” could diminish competition in the region, a moot point since the Spirit acquisition would almost certainly reduce JetBlue’s market concentration in the northeast and help it expand elsewhere. For all these reasons, JetBlue’s offer to purchase Spirit should be viewed with cautious optimism by critics and regulators since the merger could create more robust competition in the airline industry. Such a move could also result in wide ranging benefits for consumers and would be an outcome worth celebrating.

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