Sur internet : JetBlue-Spirit merger: Justice Dept. squares off in court battle over merger

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Le texte a été diffusé à une date mentionnée 2023-10-31 15:56:00.

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BOSTON — A trial that will determine the fate of a merger between JetBlue Airways and Spirit Airlines began Tuesday in U.S. District Court in Boston — the first time an airline merger case has gone before a judge.

The Justice Department is challenging JetBlue’s proposed acquisition of the ultra-low-cost carrier, while New York-based JetBlue contends the only way it can break the dominance of the nation’s four largest carriers is a merger with Spirit. Federal regulators argue the loss of Spirit, with its appeal to budget-conscious travelers, would lead to higher prices and fewer options for customers in an already-concentrated market.

It will be up to U.S. District Judge William Young to make a final determination in the closely watched case, which is expected to last about four weeks. The case is playing out against the Biden administration’s more aggressive enforcement of antitrust laws, which has included challenges against mergers in health care, publishing and technology.

JetBlue’s offer to buy Spirit shares at $33.50 values the deal at $3.8 billion, a figure JetBlue says grows to $7.6 billion when accounting for Spirit’s debt.

Airlines, Biden administration to clash in case that would reshape industry

After years of bankruptcies and mergers, four domestic carriers — American Airlines, Delta Air Lines, United Airlines and Southwest Airlines — account for about 80 percent of the U.S. market. JetBlue is the sixth-largest U.S. carrier, and merging with Spirit would move it up one spot.

Justice Department attorney Arianna Markel on Tuesday painted Spirit as a “disrupter” to the industry, saying downward pressure on airfare across the industry would disappear without the airline. A larger JetBlue, she said, would mean a loss of choices for consumers spurred by Spirit’s business model.

“Bigger isn’t always better. It isn’t better for consumers or better for competition,” she said. “A bigger JetBlue means fewer seats, fewer planes, higher fares and fewer choices.”

Young asked Markel whether Spirit had a viable economic model. Markel argued Spirit would be profitable over the next five years, citing projections from the carrier.

JetBlue attorney Ryan Shores said the carrier is a larger disrupter than Spirit, saying it is bigger competition for the “Big Four” airlines, and therefore, in a better position to keep airfares lower. He said JetBlue and Spirit account for less than 8 percent of the domestic industry’s revenue.

“The government has lost the forest for the trees,” Shores said. “This is a merger of just the sixth- and seventh-largest airlines in the country.”

The trial began on the same day JetBlue reported a $153 million loss for the third quarter. The airline attributed the financial hit to “staggering” delays caused by bad weather and air traffic control issues. Shares of JetBlue’s stock dropped more than 10 percent Tuesday, trading at their lowest price in years. Spirit’s shares plunged more than 12 percent.

JetBlue attorney Jay Cohen argued Spirit is a small player in the industry and is facing financial losses for a fourth consecutive year. He said Spirit has considered a merger since 2016 because executives say it’s the only way to compete with the four legacy carriers.

Justice Dept. sues to block JetBlue-Spirit merger, citing consumer harm

Cohen argued that if Spirit were to merge, other low-cost carriers such as Frontier Airlines and Allegiant Air would be positioned to grow their market share.

“The evidence will show that these airlines are growing rapidly and positioned for even greater growth, given the opportunity,” Cohen said.

Frontier unveiled plans to merge with Spirit in February 2022, but JetBlue chief executive Robin Hayes announced an unsolicited cash bid for Spirit months later. Spirit rebuffed JetBlue’s offer, with airline executives saying they doubted a merger with JetBlue could pass regulatory muster. After JetBlue sweetened its offer, Spirit agreed to the deal.

Bill McGee, a senior fellow for aviation at the American Economic Liberties Project, a nonprofit that advocates for stronger antitrust laws, said travelers who don’t fly with Spirit still benefit from its presence in the market. He said a merger would drive airfares higher across the country.

“JetBlue’s argument is that they’re here to fight the Big Four, and I say that’s a false argument — they’re looking for it to become the Big Five,” he said.

Hayes has argued the only way to lower fares and improve the passenger travel experience is by bringing JetBlue to more markets. As part of its plan, JetBlue agreed to pay a $70 million fee to Spirit and an additional $400 million to Spirit shareholders if the deal doesn’t win regulatory approval.

In March, the Justice Department sued to block the deal. California, Connecticut, Maryland, New Jersey, North Carolina and the District of Columbia have joined the lawsuit.

“In short, if not blocked, the merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers across the country,” Attorney General Merrick Garland said in announcing the filing. “The Justice Department is suing to prevent that from happening.”

On Tuesday, Justice Department attorneys asked Spirit Airlines chief executive Ted Christie to define what they called the “Spirit effect.” He responded: “If you can lower fares, you’re stimulating additional demand into the marketplace. More people travel more frequently with lower fares.”

Young overruled several objections from JetBlue’s attorneys, who disagreed with exhibits the Justice Department presented as evidence when examining Christie. Those included news releases and public documents that detailed Spirit’s previous concerns over merging with JetBlue in 2022.

The combined carrier would be able to offer about 1,700 daily flights to more than 125 destinations in 30 countries with a fleet of 458 aircraft, JetBlue has said. JetBlue has pitched the combined airline as a national player, but it would have only a small presence on the West Coast.

JetBlue is at the center of two cases that could reshape the airline industry

The last major domestic airline merger occurred in 2016, when Virgin America was acquired by Alaska Airlines, which outbid JetBlue.

Tuesday’s trial began months after the Justice Department won an antitrust case in the same Boston court that also involved JetBlue. In that ruling, District Judge Leo T. Sorokin ordered American and JetBlue to dismantle an alliance that allowed them to coordinate schedules and share revenue on certain routes in the Northeast. The airlines argued unsuccessfully they needed to combine operations to compete with larger carriers.

Young on Tuesday stressed transparency in court proceedings for the duration of the trial, stating his desire for “trying this public trial publicly.” The defense will have its turn to examine Christie when the trial resumes Wednesday.

Aratani reported from Washington. Ian Duncan in Washington contributed to this report.

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