The US Department of Justice (DOJ) filed a lawsuit to prevent JetBlue Airways from acquiring Spirit Airlines. The DOJ argued that the purchase is monopolistic in that it would reduce competition and increase fares. Additionally, the DOJ is worried that the increase in fares would ruin the affordability that Spirit Airlines has long been known for. In contrast, JetBlue argues the merger would create a strong competitor to the top four carriers (American, Delta, United, and Southwest), which make up 80% of the market for domestic air travel. For perspective, JetBlue and Spirit make up roughly 9% of the domestic air travel market. This is not the first lawsuit the administration has brought against JetBlue. Back in 2021, the administration sued to eliminate a limited partnership between JetBlue and American Airlines. There has not been a ruling yet, however the decision will likely hold some precedent to the most current lawsuit.
Article: https://finance.yahoo.com/news/us-sues-block-jetblue-buying-155819060.html
5 comments:
I see both sides of the argument on this one because if JetBlue actually wants to compete with the four major airline companies then they would need a stronger hold on the market, but the airline companies already hold a pretty strong monopoly on the market, so I can understand why the DOJ would not want further action taken to corner the market.
Very interesting event but I believe this case is far more different than that of Google, where there is truly a monopolistic force in the market for Google (the search engine). I can understand that the DOJ wants to be extra cautious in preventing monopoly but I also agree with the arguments of JetBlue as they don't have a significant shares in the airline market compares to other big names (Delta, AA, United, SouthWest).
Therefore, it is hard for me to believe that this acquisition can really create a monopoly. Since monopoly is not just about size but also in the competitive edge and in airline, there is not really a stark difference between different airlines' service nor aircraft.
While I understand the U.S. Government wants to prevent airline prices from rising, I don't think this acquisition would create a monopoly. Spirit and JetBlue's argument that their merger would create a low-cost airline to rival the "Big Four" makes sense. I think the current administration is under pressure and will continue to block more deals in the future.
Hello Jack,
The argument hers is whether this would create a monopoly between Jet Blue and spirit airlines. Both of which are known for their affordable flight prices. Due to the fact that there are other airline companies, this would technically not be considered a monopoly, but I do see Jetblues' argument. Due to the fact that both of these airlines combined only makeup 9% of the market then every customer matters to either company. Do to the similarities between the segmentation and demographics of their consumers this is likely to generate problems, but not a monopoly.
Overall, really good post. Well done.
This merger between JetBlue and Spirit will definitely hurt consumers because fares will rise. It will also decrease competition because the big four in the airline Industry don't have to lower their fares as much in order to compete with companies like Spirit.
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