JetBlue To Court docket: Do not Let Authorities “Swap Positions” In Anti-Belief Trial – View from the Wing | Digital Noch

JetBlue To Court docket: Don’t Let Authorities “Swap Positions” In Anti-Belief Trial

by Gary Leff on September 11, 2023

The federal authorities argued that JetBlue is a crucial competitor to maintain impartial, partly for its low costs and for the passenger demand that it stimulates, after they wished to interrupt up the provider’s partnership with American Airways. JetBlue was the antidote to main airways, and wished to maintain them from being co-opted.

Now, JetBlue says in court docket, the federal government shouldn’t be allowed to change positions because it seeks to stop them from buying Spirit Airways. JetBlue and Spirit filed a movement in limine to estop the Division of Justice from taking inconsistent positions.

Simply final yr, DOJ touted JetBlue because the antidote to the dominance of the legacy airways (American, Delta, and United) and persuaded one other court docket on this District that JetBlue is a “maverick” airline that makes it much less possible for airways to coordinate. United States v. Am. Airways Grp. Inc., No. 1:21-cv-11558-LTS (D. Mass.) (the “NEA Case”). On this case, in an effort to cease the JetBlue/Spirit merger, DOJ is saying the other: the transaction shouldn’t be allowed to proceed as a result of it is going to facilitate collusion between JetBlue and its airline rivals post-merger.

JetBlue argues that the federal government can not advance one argument to beat the partnership with American after which take the other place on this case.

I imagine the federal government was flawed in its opposition to the American Airways partnership. JetBlue was a disruptor 15 years in the past. It now not is. They do supply barely extra legroom in normal coach than American Airways, United, and Delta (however no more than Southwest). They provide free wifi and TVs (so does Delta). They usually additionally supply primary financial system fares like the most important carriers do. JetBlue as soon as provided a materially higher product and low costs however that now not stays the case.

Nevertheless the federal government’s place that JetBlue is someplace between a low value provider and legacy airline, a bulwark towards the majors that the federal government doesn’t wish to see co-opted but in addition one with the potential to co-opt, doesn’t appear all that inconsistent to me. In different phrases, it’s not merely dialectical – it’s removed from incoherent to say that JetBlue is neither fish nor fowl.

Certainly, buying Spirit Airways means,

• taking planes out of the low fare, low value enterprise mannequin
• making Spirit’s property extra like these of main airways

There will probably be fewer property within the U.S. deployed within the Spirit-Frontier mannequin post-acquisition. I’m unsure that’s sufficient to make DOJ’s case, although JetBlue’s shareholders ought to definitely be sad with how a lot the airline needed to overpay (and that it’s already needed to pay partly even when the deal falls aside) to win this settlement and that if the deal closes they’ll be transferring Spirit property out of a better margin enterprise mannequin to a decrease margin one.

Nevertheless, as JetBlue notes in its submitting, the Division of Justice lavished in depth reward on the airline in its trial towards the Northeast Alliance:

“The ‘JetBlue Impact’ describes the lower in fares that happens after JetBlue enters a market, or the rise in fares that happens after JetBlue exits a market. PX0562 at 2-6. The JetBlue Impact takes its title from an MIT research that decided that when JetBlue enters a market, different opponents decrease their fares and passenger demand will increase. Land (JetBlue) Dep. 29:20–30:4, Apr. 28, 2022.” Plaintiffs’ Proposed Findings of Truth ¶ 46, NEA Case (Dec. 2, 2022), ECF No. 332 (“NEA Proposed Findings of Truth”). This JetBlue Impact arises as a result of, as DOJ repeatedly proclaimed, JetBlue presents a novel worth proposition – low fares and prime quality – that permits it to self-discipline the legacies in a manner different low-cost airways (like Spirit) can not. S

This was actually from the Division of Justice, simply final yr:

The federal authorities claimed:

• “JetBlue is exclusive amongst low-cost airways.”
• “JetBlue differentiated itself from different low-cost airways by providing not solely low fares, but in addition high-quality service.”
• “JetBlue’s prime quality of service allowed it to compete successfully towards the legacy airways in methods different LCCs and ULCCs couldn’t.”
• “Whereas AA, United, and Delta—‘legacy’ airways—have been busy consolidating, JetBlue was attacking the harms that consolidation inflicted on passengers.”
• “For greater than twenty years, JetBlue served because the legacy airways’ foil within the northeastern United States.”
• “JetBlue is an in depth competitor to legacy airways and is ready to constrain their pricing.”
• “The JetBlue Impact produces decrease costs and better high quality service on routes the place JetBlue competes.”
• “Customers benefited from competitors between JetBlue and the legacy airways.”
• “Vacationers benefited from the JetBlue Impact whether or not or not they flew on JetBlue.”
• “In complete, competitors between JetBlue and the legacy airways has saved vacationers billions of {dollars}.”

That is, at a minimal, awkward for the federal government’s case towards JetBlue buying Spirit Airways.

In June JetBlue agreed to divest Spirit Airways property at New York LaGuardia to Frontier as soon as the merger closes. (Frontier will most likely be higher off than in the event that they’d have succeeded in a deal for Spirit!) JetBlue and Allegiant now have a deal for Spirit’s property in Boston and Newark, plus for 5 Fort Lauderdale gates.

JetBlue is getting planes and pilots, gates and slots, however received’t be rising within the locations the place it and Spirit have the best overlap or the place JetBlue is powerful and development is most constrained. Their anti-trust case does appear robust, and even post-merger JetBlue wouldn’t be among the many 4 largest opponents within the U.S. home market.

The Biden administration opposes practically all focus for its personal sake, however one senses that – if JetBlue arms the administration one other win whereas persevering with to hammer away at their case – they could be capable of come to an settlement. Mockingly customers would have been higher off with a formidable competitor of American and JetBlue in New York that would have been a counterbalance to Delta and United than with taking Spirit Airways out of the extremely low value provider sport. The DOJ picked its battles right here poorly.

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