JetBlue and Spirit confident that the proposed merger is procompetitive
Settlement agreement with Florida resolves state’s concerns and offers model on how government can ensure new jobs and additional flights
JetBlue Airways Corporation (“JetBlue”) (NASDAQ: JBLU) and Spirit Airlines, Inc. (“Spirit”) (NYSE: SAVE) today responded to the filing of a complaint by the U.S. Department of Justice (the “DOJ”) seeking to block the companies’ merger:
JetBlue and Spirit will continue to advance our plan to create a compelling national challenger to the Big Four airlines, which control about 80% of the market after years of industry consolidation that the DOJ itself approved. By coming together, we will expand JetBlue’s unique offering – where customers do not have to choose between a low fare and a great experience – to boost competition nationally.
JetBlue has proven its ability to force the legacy carriers to react to JetBlue’s low fares and award-winning service. The DOJ itself said that “In the face of consolidation, JetBlue has provided an important and steadfast source of competition” and that “JetBlue’s reputation for lowering fares is so well known in the airline industry that it has earned a name: the ‘JetBlue Effect.’” (a).
JetBlue CEO Robin Hayes said: “Customers deserve a competitive airline marketplace and we will pursue this merger to ensure they get it, continuing to disrupt the legacy airlines with low fares and award-winning service that even the DOJ has applauded. We believe the DOJ has got it wrong on the law here and misses the point that this merger will create a national low-fare, high-quality competitor to the Big Four carriers which – thanks to their own DOJ-approved mergers – control about 80% of the U.S. market. There is too much at stake for the DOJ to prevent us from bringing the JetBlue difference to more customers in more markets.”
Spirit CEO Ted Christie said: “We disagree with the DOJ’s decision to seek to block the proposed merger, which will benefit consumers and employees. We will vigorously defend our position that a combined JetBlue and Spirit will be a game changer for customers nationwide, creating the most compelling national low-fare challenger to the dominant U.S. carriers. Together, we intend to democratize flying for travelers across the country – a goal we believe is worthy of the government’s support.”
ULCC Market Will Continue to Thrive as JetBlue Brings Much-Loved, Award-Winning Experience to Spirit Aircraft
Customers will win with both more JetBlue service and continued ultra-low-cost carrier (ULCC) expansion. JetBlue competes for all customers, and its Blue Basic fare offers customers a competitive, low-price option to save more money. In addition, because many Spirit aircraft will continue to fly in their current configuration during the retrofitting process after the transaction closes, there will be no short-term change in capacity.
As JetBlue retrofits Spirit’s aircraft with its leading customer-focused experience (e.g., adding more leg room and other onboard amenities), the combined airline will also be able to meaningfully increase aircraft utilization, offsetting seats removed in the retrofitting process by adding more flights. This will result in more seats with Blue Basic fares, and coupled with the rapid growth of the ULCCs, will create a more competitive environment and ongoing access for the most price-sensitive customers.
Hayes continued: “Putting the JetBlue’s increased legroom and free amenities on Spirit aircraft is a big win for consumers, and we can offset any loss of seats with increased flying and through ULCC growth. You shouldn’t have to choose between a low fare and a great experience, so the government should celebrate an expansion of JetBlue’s low fares and customer favorites like the most legroom in coach, free Wi-Fi, live seatback TV, and free snacks coming to Spirit’s fleet.”
Settlement Resolves Concerns About Florida; Ensures New Jobs and Additional Flights
We are extremely pleased to secure a settlement with the State of Florida supporting the merger between JetBlue and Spirit. The agreement ensures that the merger will deliver new jobs in Florida as JetBlue adds its low-fare flights in airports across the state.
- The combined JetBlue and Spirit will increase seat capacity by at least 50% in both Fort Lauderdale and Orlando and will increase its aggregate seat capacity at all other Florida airports in which JetBlue or Spirit currently operate by at least 50%.
- These commitments will bring hundreds of new daily flights to Florida, additional frequencies in over 35 markets, and service to nearly 50 new routes that are not currently served by either JetBlue or Spirit.
- JetBlue will bring at least 1,000 new jobs to South Florida, at least 500 new jobs to the Orlando region, and at least 500 new jobs to support JetBlue’s expanded operations at airports throughout Florida.
- JetBlue will extend its “no furlough” policy and provide increased compensation to Spirit Team Members.
- JetBlue will maintain all Florida facilities currently in use by either JetBlue or Spirit, including Spirit’s planned future headquarters in Dania Beach, at their current or planned employment levels or greater for at least five years following the merger.
Hayes said: “We’re appreciative of Florida State Attorney General Moody’s willingness to recognize the opportunity for consumers and negotiate a fair settlement. It’s unfortunate the federal government and other states want to block the benefits of this merger, including significant job growth and the increased number of affordable flights that this combination unlocks.”
In fact, all JetBlue crewmembers and Spirit Team Members will benefit from a larger, more competitive airline:
- Once combined, the airline will have more aircraft, a bigger network, more jobs, and more opportunities.
- JetBlue has committed to strong protections for crewmembers and Team Members, including extending its 23-year no furlough commitment, committing to no displacements, and providing assurances around seniority protection.
- By combining airlines, crewmembers and Team Members will have the opportunity to open the collective bargaining agreements and discuss topics important to them, including pay scales and benefits. JetBlue is incentivized to complete this process as fast as possible so the airline can receive a single operating certificate and begin functioning as one airline.
JetBlue-Spirit Merger Benefits Are Clear and Have Wide Support
The benefits of a JetBlue and Spirit combination have been widely recognized by consumer advocates, labor leaders, legislators, local government officials, industry experts, and academics. In addition, thousands of JetBlue crewmembers and Spirit Team Members have submitted letters of support to the DOJ and the U.S. Department of Transportation. We are confident a court, too, will recognize the merits of our case.
The rationale for a JetBlue-Spirit combination is clear:
- JetBlue is 3x more effective than Spirit at bringing down competitor fares. JetBlue’s unique combination of low fares and great service is a competitive force that keeps the legacy carriers on their toes and results in lower fares.
- JetBlue’s award-winning customer experience will reach more customers. JetBlue is loved by customers for its award-winning onboard service, featuring the most legroom in coach (b); free and fast Fly-Fi broadband internet (c); complimentary and unlimited name-brand snacks and soft drinks; and free, live DIRECTV® programming at every seat.
- The combination will unlock long-term opportunities to add more destinations and routes that otherwise would not be possible. This new flying will bring increased choices, and low-fare competition to more cities and in legacy carrier hubs.
- JetBlue and Spirit together will still be much smaller than any Big Four carrier. Even as the fifth-largest carrier, a combined JetBlue and Spirit will have only 9% market share, compared to 16-24% for each of the four largest airlines.
- JetBlue and Spirit primarily compete with other carriers not each other. According to a third-party source published in April 2022 and reaffirmed with more recent data, JetBlue and Spirit only overlap on 11% or less of the nonstop routes on which both of them fly.
- JetBlue has offered unprecedented upfront divestures to ensure ULCC growth. To address potential concerns around the limited overlap between JetBlue and Spirit, JetBlue has already made upfront commitments to divest all of Spirit’s holdings in Boston and New York, as well as five gates and related assets in Fort Lauderdale, which significantly reduces the already small number of nonstop overlap routes.
- JetBlue will expand sustainability leadership. JetBlue expects to extend its industry-leading climate commitments to the combined airline, including its target to achieve net zero carbon emissions by 2040, which is ten years ahead of the broader U.S. airline industry’s goal. As part of these efforts, JetBlue will leverage the combined company’s order book to accelerate the fleet transition to next generation, fuel-efficient aircraft and introduce regular use of sustainable aviation fuel into Spirit’s West Coast operations after closing.
