There was a point in 2022 during the wrangling over Spirit Airlines when Frontier Airlines chairman Bill Franke suggested that the bringing together of two ultra-low-cost carriers would be considered “pro-competitive” by regulators.
Today, with hybrid carrier JetBlue Airways’ move to buy Spirit having been blocked by a US district court on competition grounds – notably including the observation that “consumers that rely on Spirit’s unique, low-cost model would likely be harmed” – it is difficult to escape the conclusion that Franke might have had a point.
The ruling leaves Spirit in a particularly tough place, with a Chapter 11 filing potentially among its options following its loss-making emergence from the Covid crisis. Might the unlikely reignition of its Frontier tie-up be another one?
In JetBlue’s case, while it is not clear whether an appeal will be launched against the decision, there is also a school of thought that it might not have been so keen on an acquisition of Spirit based on today’s market fundamentals.
Those fundamentals include a US domestic market that has been going through a degree of ‘normalisation’ post-Covid, as demand softens and costs rise. It looks vastly different from the early 2022 one, when the only way was up following two years of pandemic impacts.
Still, JetBlue’s desire for scale will remain strong in a market where aircraft are extremely tough to come by – and one where, whatever the courts say, it remains dwarfed by formidable competitors in the shape of American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.
The loss in short order of Spirit and its Northeastern Alliance with American Airlines is a code-red scenario for JetBlue, but one that current chief executive Robin Hayes – and his replacement Joanna Geraghty – will have been planning for.
Whatever comes next, the court’s assertion that the ruling represents a “victory for consumers” will be tested, not least because history shows that blocking acquisitions in the airline sector does not necessarily mean the individual carriers emerge as happy, healthy competitors. As recent experience in Colombia demonstrates, for example, consolidation can just end up happening on more messy terms, as carriers fall over.
The Spirit sage likely has some way to run yet.
