The Problems with JetBlue's Plan to Buy Spirit Airlines

#Jetblue is trying to buy #SpiritAirlines. It's a terrible idea. Consolidation in the US aviation industry has resulted in higher fares, less reliable planes, spiraling junk-fees, and brutal conditions for flight- and ground-crews. 1/ pic.twitter.com/6Ppe19QAuW

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

If you'd like an essay-formatted version of this thread to read or share, here's a link to it on https://t.co/iSBh8srvly, my surveillance-free, ad-free, tracker-free blog:https://t.co/q10mg0WJHs 2/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

The four remaining US major airlines, who gobbled their rivals, are three times more profitable than their European counterparts:https://t.co/79Kp0zhvtQ

That's great news if you're an airline shareholder. 3/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

It's terrible news if you're hunting for your lost bags, or if you're a flight attendant or pilot being squeezed, or if you're being hit for billions in covid bailouts.. 4/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

It's especially bad news if you're one of *1m Americans* who were stranded during Christmas week by the failure of #SouthwestAirlines' IT systems, which use duct-tape and wishful thinking to hold together the IT systems of all the airlines #SWA bought:https://t.co/akWkfu15qT 5/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

The collapse of competition in the US airline industry is the result of a deliberate policy, the "#ConsumerWelfare" theory of #antitrust, which says that #monopolies are "efficient" and good for the public. 6/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

It's a theory that took root under #Reagan, and was reaffirmed and expanded by every president, R or D, since.

Until now. 7/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

For the first time in generations, Biden's administration has taken up the neglected, noble art of #trustbusting, blocking mergers and promising to break up the mergers we've already seen. 8/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Biden appointed key enforcers like #JonathanKanter at the @JusticeATR and @linakhanFTC at the @FTC:https://t.co/aZn71lmcV9 9/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Which is bad news for the proposed Jetblue/Spirit merger. Last week, the #DoJ filed suit to block the merger, joined by the AGs from #NY, #MA and #DC.https://t.co/Vv03bszk0n 10/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Notably, @secretarypete - who has been historically shy of using his prodigious powers as the boss of a large agency - will also block the merger:https://t.co/iPgkhPKL0K 11/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Spirit's shares are in the toilet. Writing in his BIG newsletter, @matthewstoller explains why shareholders are bolting for the doors: the case against the Jetblue/Spirit merger is *incredibly* strong. A slam-dunk, even:https://t.co/vaaWRdQutW 12/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Spirit, after all, is America's most famous budget airline. That means that it attracts fliers by undercutting the Big Four. 13/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

That puts downward pressure on the Big Four, who are faced with the choice of taking lower profits to retain fliers' business, or losing *all* the profit when those fliers take Spirit. Remove Spirit from play and that downward pressure on fares disappears. 14/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

You don't need newfangled #NeoBrandeisian antitrust to see why this is bad - even under "consumer welfare" antitrust, anything that will obviously make prices go up is prohibited (indeed, this is the *only* thing consumer welfare antitrust cares about). 15/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

How do we know that a Jetblue/Spirit merger is a price-increasing, illegal antitrust violation? *Spirit says so*. 16/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

This is truly delicious! You see, last year, there was a bidding war for Spirit and Jetblue was the outside bidder. 17/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Spirit's board wanted to convince their shareholders to reject Jetblue's bid, so they commissioned some aviation economists to do a study on the matter, which Spirit then circulated to its investors. 18/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

That report is unequivocal: it estimates that a Jetblue/Spirit merger will be a disaster. Spirit's participation in a route lowers fares by 17%. When Spirit stops competing on a route, fares go up by *30%*. 19/ pic.twitter.com/6kudGfQcC1

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Spirit CEO #TedChristie called the proposed merger "unlawful" and "unethical":https://t.co/X1VzOOaIfV

Spirit is a major competitor to Jetblue. As Stoller notes, they compete on hundreds of routes, and are adding more all the time. 20/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Jetblue clearly understands that removing Spirit as a competitor would let it raise fares. As one Jetblue manager - quoted by the DoJ - explained: "I don’t think we should be selling the [Spirit] fare if [Spirit] is not serving the market." 21/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Jetblue's internal memos on the merger include an executive stating that the merger will allow the airline to realize "efficiencies" by reducing service and increasing fares. This isn't the kind of "efficiency" we want. 22/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Stoller notes that even with this damning evidence, there are still some spoilers. #RonDeSantis has cut a deal to back the merger, even though #Florida stands to suffer the most of any state from this merger due to the number of Spirit flights taking off from its airports. 23/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

And, Stoller notes, the judge presiding over the case is an 82 year old Reagan appointee - a ideology-addled dotard named William Young. 24/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

But, Stoller notes, with Buttigieg and the @USDOT on the case, it's hard to see how this merger can go through - the DOT has very broad powers to block mergers that reduce routes and don't have to meet the same evidentiary standards as the DoJ would in court. 25/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023

Stoller thinks Buttigieg had a "moment of truth." Pressure from activists convinced Buttigieg his future political fortunes are better served by boldly using his powers (pleasing voters), rather than sitting on his hands (pleasing future donors):https://t.co/TDFVcdhAQ3 26/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 12, 2023