JetBlue Airways is buying Spirit Airlines for $3.8 billion in a deal that could increase competition at the top end of the U.S. airline industry while eliminating the largest discount airline for travelers on a tight budget.
The agreement announced Thursday capped bidding war that began in April, and it came one day after Spirit’s attempt to merge with rival discount carrier Frontier Airlines fell apart.
JetBlue and Spirit would become the fifth-largest U.S. carrier, with about 9% of the market. The combined airline would move much closer to the leaders – American, United, Delta and Southwest – while leaving the rest of the pack far behind.
The only major obstacle remaining is the U.S. Justice Department. Antitrust regulators in the Biden administration have been critical of mergers, which they believe hurt consumers by limiting competition. The Justice Department sued to block a partnership between JetBlue and American Airlines.
JetBlue’s case for regulatory approval rests on two main arguments: JetBlue says its reputation for lowering fares, together with the size of a JetBlue-Spirit combination, mean it could force bigger airlines to cut prices. And JetBlue has already volunteered to give up Spirit gates and takeoff and landing slots at airports in New York and Boston that could be given to smaller low-cost airlines, which would boost competition.