JetBlue Expects U.S. Move to Block Merger With Spirit

JetBlue Airways said Monday that it saw a “high likelihood” that the Justice Department would sue the company this week over its planned acquisition of Spirit Airlines. The $3.8 billion deal could create a new challenger to the nation’s four dominant carriers, but would add to industry consolidation.

JetBlue said that it had long prepared for such a lawsuit and that its timeline for closing the deal was unchanged, provided it overcomes the expected challenge in court.

“We believe there is a high likelihood of a complaint from D.O.J. this week, and we have always accounted for that in our timeline to close the transaction in the first half of 2024,” the company said.

Critics of the deal say removing Spirit from the market would limit competition and further consolidate an already concentrated industry. While JetBlue is known for affordable fares, Spirit offers even lower prices, charging extra for everything from printing boarding passes at airport kiosks to selecting seats in advance. After the deal, JetBlue would reconfigure Spirit’s densely packed planes, removing seats, increasing legroom and adjusting the economics of each flight.

According to two people familiar with the Justice Department’s plans, a government lawsuit will contend that after removing seats from Spirit planes, the combined airline would not be able to increase revenue per passenger without raising prices.

Buying Spirit would allow JetBlue to accelerate its plans for growth. Today, JetBlue controls more than 5 percent of the U.S. airline market. After the acquisition, it would have a 10 percent share, making it the fifth-largest airline in the country. United Airlines, the fourth-largest carrier, has a 15 percent market share. Southwest Airlines, Delta Air Lines and American Airlines each have a more than 17 percent share.

“JetBlue’s combination with Spirit allows it to create a compelling national challenger to these dominant airlines,” JetBlue said in a news release on Monday describing some of its arguments in favor of the deal.

The acquisition would benefit consumers and disrupt the industry, it said, allowing JetBlue to bring low fares to new markets and forcing those large airlines to match its lower prices. JetBlue also said it had committed to giving up some of Spirit’s holdings in markets such as Boston, New York and Fort Lauderdale, Fla., where the combined airline would have an outsize presence.

But the two people familiar with the Justice Department’s plans said its suit would assert that there was no guarantee that other airlines, with different cost structures from Spirit’s, would pick up Spirit slots that JetBlue might offer to shed.

In addition to the Justice Department, the Transportation Department could also stand in the way of the deal by blocking the transfer of operating certificates, opponents of the sale have argued.

After the expectation of a federal move to block the acquisition was reported on Monday, Spirit shares fell more than 8 percent. JetBlue shares were up about 1 percent.

Unions representing workers at both airlines are divided on whether the merger should proceed. Last month, the Association of Flight Attendants-C.W.A., which represents 5,600 flight attendants at Spirit, wrote to Attorney General Merrick B. Garland and Transportation Secretary Pete Buttigieg to express support for the deal.

“The JetBlue-Spirit merger will help to correct conditions in the industry with demonstrable improvements and protections for workers along with greater competition that benefits workers and consumers alike,” the union’s president, Sara Nelson, said in the letter. “This is the anti-merger, merger.”

In a separate letter, the head of the Transport Workers Union, which represents 6,800 JetBlue flight attendants, asked Mr. Garland and Mr. Buttigieg to prevent the acquisition, arguing that it would violate antitrust laws and undermine competition and workers.

In a letter in September, Senator Elizabeth Warren, a Massachusetts Democrat, asked Mr. Buttigieg to use his department’s “historically underutilized” authorities to intervene.

JetBlue is also awaiting the outcome of a Justice Department antitrust lawsuit over the airline’s partnership with American in Boston and New York. A federal judge in Boston is expected to issue a decision in that case imminently.

Lauren Hirsch contributed reporting.