JetBlue Airways is ready to abandon Spirit’s position in New York City in a bid to get its big $3.8 billion acquisition approved.
The New York-based carrier announced on Thursday that it’s reached an agreement with Frontier to divest all of Spirit’s holdings at the New York LaGuardia Airport (LGA) as part of JetBlue’s proposal to acquire Spirit.
Upon the successful closing of the deal, JetBlue would give six gates and 22 slots — essentially takeoff and landing permissions — to Frontier, which will be able to use them to boost its ultra-low-cost service out of the New York City airport many consider to be the area’s most convenient.
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These divestitures are part of JetBlue’s upfront commitments included in the merger agreement and are contingent on the transaction being successfully completed, which JetBlue expects to happen in the first half of 2024.
However, the airline is already facing regulatory headwinds from the Department of Justice, which sued to block the merger earlier this year.
The lawsuit is still awaiting its day in court, but JetBlue’s legal affairs team is seemingly willing to come to the table and make some concessions to get the merger approved.
The Department of Justice believes that a merger between JetBlue and Spirit would ultimately cause airfares to increase since a combined airline would eliminate a key budget carrier and would lead to fewer overall seats for sale.
This position stands in contrast to past precedent in which the government has approved mergers such as American-US Airways, United-Continental, Delta-Northwest and Southwest-AirTran.
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If approved, the merger would create the fifth-largest airline in the U.S., and JetBlue plans to absorb all of Spirit’s assets and completely fold the carrier into its existing operation.
JetBlue argues that it needs the merger to better compete against the nation’s big four airlines, including American, Delta, Southwest and United, which together make up roughly 80% of the country’s aviation market.
JetBlue has already tried winning support for the merger from local governments and elected officials, including Florida Attorney General Ashley Moody, who worked with JetBlue to ensure at least 2,000 new jobs in Florida as a result of the proposed merger.
Meanwhile in New York — perhaps the most capacity-restricted airspace in the country — JetBlue is willing to preserve the same level of ultra-low-cost competition by giving Frontier all of Spirit’s gates and slots.
“We are committed to ensuring our combination with Spirit preserves ultra low-cost carrier access in New York. We are pleased that this agreement with Frontier will maintain the same level of ultra low-cost carrier service at LaGuardia Airport,” said Robin Hayes, JetBlue’s chief executive officer, in a statement.
While JetBlue is ready to charge ahead with its Spirit takeover, the airline recently hit a legal snag in its other high-profile lawsuit with the Justice Department.
That decision came on May 19, and it blocked JetBlue’s Northeast Alliance with American Airlines. Judge Leo T. Sorokin argued that the pact “substantially diminishes competition in the domestic market for air travel.”
The two carriers have 30 days to wind down their alliance, pending a possible appeal or a deadline extension.
American’s CEO Robert Isom indicated on Wednesday that the carrier would appeal the DOJ’s ruling, but interestingly, JetBlue declined to comment and said it continues to evaluate its options for the Northeast Alliance.