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JetBlue-Spirit antitrust trial wraps with all outcomes on the table; focus turns to Alaska-Hawaiian merger

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The antitrust trial between JetBlue and Spirit finished on Tuesday, with closing arguments from the Department of Justice and lawyers for the airlines marking the end of a monthlong trial that will decide the future of the two airlines — and potentially impact the broader U.S. airline market.

Closing arguments from both teams largely followed the same narratives that were laid out starting with opening arguments on Oct. 31. The DOJ has argued that the merger will hurt the most price-sensitive consumers, with Spirit’s elimination from the market on some routes causing prices to rise.

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Lawyers for JetBlue, on the other hand, have said that by absorbing Spirit, it could double its size and compete more effectively with the four major U.S. airlines — American Airlines, Delta Air Lines, Southwest Airlines and United Airlines — that together control about 80% of the U.S. air travel market.

The ultimate question at the heart of the trial boiled down to whether the risk of raising the lowest fares on some routes through Spirit’s exit would be worth the potential to lower the average airfare across the broader market by putting more pressure on the major carriers.

JetBlue and Spirit have argued that if Spirit were to no longer exist, other ultra-low-cost carriers — such as Frontier, Allegiant, Avelo and Breeze, among others — would fill the void. The airlines plan to divest some of Spirit’s holdings in certain markets (like Boston, New York and Fort Lauderdale), giving gates and slots to other ULCCs to preserve competition.

Related: Spirit saw Northeast Alliance as biggest threat to JetBlue merger, testimony reveals

The DOJ, however, has argued that despite testimony from officials at some of those other ULCCs, it’s unlikely that they would seek to cover the former Spirit routes at least in the next few years, given differences in business models. For instance, Allegiant primarily flies on routes where there is no other nonstop competition, while Spirit will compete directly with legacy airlines on popular routes like New York to Miami.

There were repeated references on Tuesday to a JetBlue analysis that found the airline commanded a 30% premium on fares compared to Spirit. The DOJ has said that this is evidence JetBlue plans to raise fares; JetBlue officials have said that it was a hypothetical analysis when planning how to value Spirit for its bid, which did not reflect real-world conditions.

Throughout the closing arguments and during the rest of the trial, Judge William G. Young asked clarifying questions of attorneys for both sides. However, he cautioned that some of his queries were hypothetical and should not be taken as a suggestion of how he would rule.

During the arguments on Tuesday, Young asked both sides whether they thought it would be appropriate to rule in a way that would conditionally allow the merger, contingent on the airlines meeting several requirements, such as further divestitures.

spirit and jetblue plane

Ryan Shores, an attorney for JetBlue, said that if the judge saw that as a viable path forward, it would be a satisfactory solution. Justice Department lawyer Edward Duffy said that a total injunction was the only way to prevent consumer harm. When the judge asked whether that would be too restrictive and if that would block a potential future merger if the market changed, Duffy replied that any future deal would be a different case.

“We’re not going to get anywhere if you win, I enjoin this merger, and Spirit goes belly up,” Young said, citing testimony that claimed that the financial difficulties Spirit has faced in recent quarters amount to an existential threat to the airline.

The government sued in March to stop the merger that the two airlines agreed to in 2022 after JetBlue made an unsolicited bid, blocking a similar effort by Frontier to acquire Spirit.

While the DOJ has challenged previous mergers between airlines, many of those were settled. A series of bankruptcies and industry consolidations that led to the current dynamic with four major U.S. airlines — many of which were ultimately allowed by the DOJ — has created a playing field where smaller entrants must merge to survive and prosper, Shores said.

“The simple fact and economic reality is that scale matters in this industry,” Shores said. “Where we sit today, it’s very difficult for small airlines to compete.”

Shores raised the pending merger of Alaska Airlines and Hawaiian Airlines, just announced on Sunday, as another example of this dynamic.

The DOJ won a similar antitrust case earlier this year against JetBlue’s Northeast Alliance with American Airlines. That case involved one of the four major U.S. airlines and occurred while the Spirit merger was on the table.

Related: JetBlue once planned to buy Alaska Airlines, court testimony reveals

Attorneys for JetBlue cited some arguments made by the DOJ during that previous trial, in which the government argued that JetBlue was a unique and powerful competitor.

“In total, competition between JetBlue and the legacy airlines has saved travelers billions of dollars,” one of the statements read.

“High quality of service allowed it to compete effectively against legacy airlines in ways other LCCs/ULCCs could not,” read another. “For more than 2 decades, JetBlue served as legacy airlines’ foil in the northeastern US.”

The big question now is when a decision will be issued by Young — there is no jury for the trial. Young, who was first appointed to the federal bench by then-President Ronald Reagan in 1984, had previously signaled that a ruling was possible before the end of the year. However, it was unclear whether he still saw that timeline as viable.

The $3.8 billion acquisition would see JetBlue pay $33.50 per share of Spirit, which has drawn notable interest from investors. Spirit’s stock closed Tuesday at $13.67, down for the day but up from a one-year low of $8.78 in November.

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