Judge blocks JetBlue from acquiring Spirit Airlines(nytimes.com) |
Judge blocks JetBlue from acquiring Spirit Airlines(nytimes.com) |
He said straight up that Spirit Airlines is aiming to be the Dollar General of the skies. If you want something luxurious, go elsewhere. But he called out the other airlines who pretend like they are the Nordstrom of the skies, but don’t actually live up to that.
At least in my anecdotal experience.
That lends more credence to the comparison against Dollar General and similar discount stores. Dollar stores generally charge a higher price relative to quantity, but they offer smaller quantities than big box stores which allows their customers to spend less (but also get a lot less). Wendover on YouTube did a video on this recently [0].
The last time I did they canceled my flight overnight at 2:30am and forced me to rebook my ~$300 flight at twice the cost -- and it was leaving the same airport at the same time to the same destination.
And it was a miracle that I woke up to the email alert and was able to rebook my flight before it sold out anyway.
Of course, I wouldn’t fly spirit if I had a complex flight itinerary or needed to be 100% sure I would arrive when expected. Then again, I’ve had more issues with other airlines (looking at you Alaska) as well, so go figure.
All that being said, the invisible variable most of us miss is plane maintenance. I don’t know what spirit’s record is in particular on this axis, but some airlines really skimp on maintenance costs, sometimes leading to entirely preventable disasters ([0] to name one of many)
[0] https://en.wikipedia.org/wiki/Alaska_Airlines_Flight_261
As a lite traveler Spirit fits my needs and I have more money in my pocket for my trip(s). As well I'm off the plane with my book bag and out of the airport quickly! I always get an aisle seat up front.
The problem with aerospace is that it has a very high barrier to entry, so consolidation ends up hurting the consumer more often than not. Same as other infra related industries like telcos and civil engineering work that require fairly massive upfront capital and regulatory investments to operate.
Better to leave a hole in the market to encourage new entrants, even if it means consumers suffer in the short term.
Nobody is clear about the right move on how to deal with this problem. There's no sure fire conclusion.
[1] Once you account for the padding, the angle you have to sit at, etc. Even if you aren't unusually tall, it is noticeably awkward and cramped.
Another important item from the trial - only 1/3 of Spirit customers pay the low fee without add-ons. The rest go for something more Jet Blue like anyways.
The precedence that the judge set here is more important than the actual merger. If any tiny subset of customers are harmed the deal cannot go through. I was really surprised to see this from a judge appointed by President Reagan. This could really crush M&As in America.
The same cannot be said for JetBlue
> “If JetBlue were permitted to gobble up Spirit — at least as proposed — it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline,” Young wrote. “… Worse yet, the merger would likely incentivize JetBlue further to abandon its roots as a maverick, low-cost carrier.”[2]
> This could really crush M&As in America.
That's a bit hyperbolic. If it does crush anti-competitive / anti-trust mergers, that's a win in any capitalist's book
[1] https://money.usnews.com/investing/news/articles/2024-01-16/... [2] https://www.washingtonpost.com/transportation/2024/01/16/jet...
The best argument I see for allowing the merger is that Spirit has been consistently losing money since the pandemic and may no longer have a viable business model. If they're destined for shutting down in the long run anyway, then you may as well let them attempt to merge, that'll probably lead to less of their market share winding up with the 4 biggest than them simply closing up shop will.
In the new era, practices, perceptions and mission statements have to also be up to a standard, not just statistics. I wonder how long this could go on for.
Really? How old is he, 80? Why do Americans insist in having such geriatric leaders, they're starting to make Iran look normal...
Do you mean business class?
https://www.courtlistener.com/docket/66962142/united-states-...
[1] https://www.ign.com/articles/ps5-has-outsold-xbox-series-x-a...
That suggests that there are other reasons to block a merger other than preventing a monopoly from from growing.
Microsoft & Activision merging only moved them to the 3rd largest studio. Also it has plenty of pro competition factors allowing them to compete against Sony & Nintendo. They also made deals with many other distributors about expanding their game reach via cloud services. Lastly it allowed them to acquire King. Microsoft would like to break into mobile gaming more & there is a very monopolistic walled garden ala Google & Apple.
Go after Microsoft for their monopolist tactics but this wasn't one.
https://www.wsj.com/articles/unfortunately-big-is-bad-is-bac...
We have seen this with of the merger challenges that have happened since Biden took office. Trump also tried to block a few, mainly out of his own ego from what I could see. (AT&T-Time Warner Deal specifically).
JetBlue's biggest problem remains their access to airports, if they were able to get more access to that they would likely be a serious threat to the bigger airlines.
I don't understand how this is bad for competition when we desperately need more competition that can actually compete.
Some more discussion: https://news.ycombinator.com/item?id=39019876
It's an utterly feckless uneven application of the rules to everyone's detriment. You couldn't have designed a worse airline industry if you tried.
Why not view it as, this is a good start and hoping it continues to prevent even more consolidation and monopoly in airlines and other industries? The notion that there has to be more consolidation to compete is only good for the companies monopolizing - not the consumer. Why should we be helping them make more profit by abusing market power versus delivering better products and competing?
Yeah, exactly. Spirit competes with JetBlue on multiple routes which would otherwise be monopolized by the big three (American, United, Delta). This merger would have given JetBlue an almost total monopoly on the east cost low fare market. An unconditional win for the consumer.
However you should be sad in general because this is a terrible judgement that dooms a business from taking the only way out that would have been a reasonable outcome for its employees, shareholders and users.
I'm not familiar with how the process works, would JetBlue now have to compete with larger airlines for these assets if Spirit goes under?
"JetBlue's biggest problem remains their access to airports, if they were able to get more access to that they would likely be a serious threat to the bigger airlines."
That is like 'Their political party is cheating, we need to cheat bigger to win". That is leaning in to making the situation more and more rigged, more and more of a failed market / system.
I will leave it as an exercise to the reader to go read about how less players in a market bad for competition. Matt Stoller is a good place to start.
JetBlue can bid for slots at an airport, like anyone else. If bigger airlines are blocking them, lets fix that market to be competitive, NOT "let's help the market degrade into Oligopoly faster".
This seems to be a common theme in politics. A bad decision was made by the previous generation. Now the current generation, seeing that the decision was bad, makes decisions that should have been made in the first place. The problem now is that the bad decisions have already been made, and what at one point would've been a good decision is now either exacerbating the problems caused by the bad decisions or is at best failing to remedy them.
It comes up a lot in healthcare and immigration for example. What constitutes good policy is highly conditional on the current state of the world.
Considering the talk around Spirit being on the verge of bankruptcy it seems like it may be a mix of the 2 and the first one being an important part of this conversation.
just saying lets fix the market while ignoring that there is a problem with the market with a potential thing to address part of it right in front of us is just passing on the problem until we have the perfect solution.
That perfect solution may not be viable or may be many years away for a variety of problems (not the least of which being just a space problem at airports).
We have a bad tendency to try to get the perfect solution to a problem which stops us from having anything.
https://customersupport.spirit.com/en-us/category/article/KA...
The more interesting transaction that arguably should've been stopped was Alaska purchasing Virgin America as they were both largely west coast airlines. But amazingly enough (as someone who held status on VA and later Alaska), my flights actually got cheaper after that merger, and I was consistently upgraded too. So if that merger hadn't happened, my experience would've been worse.
To put this in perspective, 60 out of 566 JetBlue and Spirit routes overlap. Alaska and Hawaiian share 12 routes out of 336.
2) Their ticket prices are often a fraction of the others. Even if service quality is lower, I’d be surprised if it wasn’t pushing down overall prices.
There is a risk of the big 4 just buying the slots to tie them up though, this happens a lot in markets like Australia which have very strict arrival/departure windows but is a lesser problem in markets like the US which throttle throughput based on ATC capacity instead.
I've never felt jerked around with any of the majors when it came to rebooking travel. They can't conjure up an empty seat that doesn't exist, but I've also never been required to pay a higher fare for them to take me on the itinerary that I originally booked.
Delta in particular I think is quite good at recovery from irregular ops (at least for their higher tier frequent fliers), but on the few instances with other carriers, I expect (and have received) decent and fee-free service when the airline cancelled a flight or missed a connection due to airline fault. I fully expect to have a crappy experience on Spirit whether or not they cancel the original flight.
It does seem like post-Covid all of the airlines are racing to the bottom for quality.
I've had canceled flights before but no other airline has ever forced me to rebook effectively the same flight at double the rate and wait the 8-10 days for the refund on my original flight to my credit card. Back when I was a brokie (you know, Spirit's main customer base) that kind of shit would have been trip-ending.
I assume you're talking about JetBlue's Mint product which is all business class for some cross country flights and a few international. Again, I think they are trying to provide the best value for business class compared to the larger carriers.
We shouldn't prioritize shareholders over the general health of a marketplace
> That's a bit hyperbolic. If it does crush anti-competitive / anti-trust mergers, that's a win in any capitalist's book
The judge literally ruled here that a very small market (1/3 of customers on a small airline) would be harmed. JetBlue was also willing to discuss divestures & the government refused because they didn't care about competition or working with JetBlue. They have been doing weak cases for the past few years in hope to get any precedence set that makes M&A harder.
The judge uses the DOJ's expert witness's findings even after agreeing with JetBlue's team that the witness's model was completely broken.
This was a pro-competitive merger in my opinion because it created a stronger rival for the big 4, albeit still roughly half the size of most of them.
> ...the government refused because they didn't care about competition or working with JetBlue.
I take it this is your opinion based on your perception?
However from the U.S.News link I posted above
"The judge, who had questioned whether further asset divestitures could make the deal work, said, "The courthouse doors remain open, should the defendant airlines decide to try again."
You can also read the actual ruling [1] which states:
> _"Throughout June 2022, JetBlue made a series of revised offers to acquire Spirit, with increases in per-share price, increases in the reverse termination fee, and commitments to divestitures. Spirit continued to resist, citing continued concerns about the anticompetitive nature of such an acquisition. On June 6, 2022, Mr. Christie received an email from Mr. Hayes with an attached new, revised offer for Spirit Airlines. On June 27, 2022, JetBlue made a further amended offer to purchase Spirit; the Spirit Board did not view this amended offer as better and did not accept it. Instead, Spirit issued another press release on June 28, 2022, reaffirming its commitment to the transaction with Frontier and noting that the “[l]atest offer from JetBlue does nothing to address our Board’s serious concerns that a combination with [JetBlue] would not receive regulatory approval.”_
So even the Spirit board did not prefer this acquisition, even with the divestitures, but acquiesced to expected shareholder concerns on value maximization
[1]https://s3.documentcloud.org/documents/24362262/jetblue.pdf
In the end, Spirit should have stayed with their Frontier merger though the DOJ probably would have tried to block that as well.
Today Spirit is saying they will be looking at restructuring. Every analyst seems to be saying they are going to declare bankruptcy.
I have no idea how the DOJ or the Judge sees this as increasing competition, which I'm all for by the way. Even if Spirit doesn't go bankrupt they cannot compete as a low fare provider anymore. They will just slowly bleed for the next several years as they sell off and are unable to grow. Same with JetBlue now as well.
Alaska Airlines literally just bought Hawaiian. It hasn't even been two months.
Framing the block of an attempted merger between two airlines that combined are worth less than Alaska (which is itself far from an industry titan) as "anti-monopoly" is simply inane.
As a result, you stifle the free market and prevent the emergence of competition. The knock on effect is less choice for the consumer and a less efficient market.
Won't someone think of the poor investors? Again, that's not who public policy should serve.
(Observed next to me on the one and only spirit flight I’ve been on)
An analogy would be two competing gas stations at a very busy intersection with no plots nearby to build more stations. Just by existing they either drive each other down on price or collude on it. One going under means a new station could exist, but one buying the other guarantees prices do not go down.