On Jan. 14, William Young, a Ronald Reagan–appointed federal district judge in Boston, sided with the U.S. Department of Justice and blocked JetBlue’s proposed $3.8 billion acquisition of Spirit, a deal that would have allowed two discount airlines that fell on hard times in the COVID pandemic to merge and leverage more power against the so-called Big Four: American, Delta, Southwest, and United.
In his opinion, waxing poetic about the beleaguered Spirit, Young wrote that the merger was incompatible with federal antitrust laws, which are aimed at protecting the American consumer from harmful corporate combinations—especially when they raise prices. A combined JetBlue and Spirit would have created the fifth-largest airline in the country, controlling 10 percent of the domestic market.
It wasn’t to be. “Spirit is a small airline. But there are those who love it,” Young wrote, explaining why he had sided with the DOJ. “To those dedicated customers of Spirit, this one’s for you. Why? Because the Clayton Act, a 109-year-old statute requires this result—a statute that continues to deliver for the American people,” he added, referring to the longtime antitrust law.
Ever since the merger failed, Spirit’s stock has tanked, and its market value has slipped from $6 billion in 2015 to comparative pennies today. Speculation of a collapse has been rampant, and news that Spirit would delay the purchase of more planes and would be cutting certain routes followed. Then, earlier this month, “people familiar with the matter” told the Wall Street Journal that the airline is indeed in negotiations ahead of a potential Chapter 11 bankruptcy filing.
William McGee, a senior fellow for aviation and travel at the American Economic Liberties Project, was a vocal critic of the merger deal. He told me that ULCCs like Spirit are the only real competition for the big carriers—the one thing that actually reduces their prices.
In his opinion, Young hailed the so-called Spirit effect: “Spirit has found that, typically, once Spirit enters a route, passenger demand increases and the average fare on that route decreases.”
Research has found that Spirit’s entry into a marketplace lowers fares in nearly every case. For example, a 2016 study documented a Houston–to–Kansas City route that was serviced only by United Airlines. Tickets on average went for $300—until 2014, when Spirit also began to service the route. Spirit offered fares closer to $90, and United was forced to bring the average fare down to $180, according to the study. This effect was seen again and again in routes across the country.
“If the JetBlue merger had gone through, I can guarantee you that the following Monday morning, fares would be much higher on American and United—because American and United have this mosquito bothering them,” McGee said. “That’s how the big guys look at them. They’ll do everything they can to squash them.”
You can see the effects of Spirit’s competition when you travel with a legacy carrier. If you’ve flown Basic Economy on American, Delta, or United—that lowest option where you cannot select your seat, you board last, and even if you have loyalty membership you’re not eligible for upgrades—you can thank Spirit.
But Basic Economy is still often a higher price point than Spirit’s base fare, even with a few add-ons. In that way, Spirit offers access to a customer segment that, without those cheaper-than-cheap flights, might drive instead of fly, or might not take a trip at all.
“Spirit is basically the only choice for lower-income Americans on routes,” McGee said. “For a lot of people, it’s a question of whether or not you’re gonna see your grandparents, or the grandparents are gonna see their grandkids. If Spirit’s not there, then they’re not going.”
Even for the people who do shell out for the more expensive flight rather than Spirit, the benefit is still there. If you’re traveling on a route Spirit also services, you can bet you saved money from the mere fact that it was an option.