Smaller airlines operating in the shadow of the nation’s four dominant air carriers are feeling pressure to merge with others in order to gain access to more planes and airport gates. This was evident in a federal courtroom in Boston, where JetBlue Airways attempted to convince a judge to approve its $3.8 billion acquisition of Spirit Airlines. Similar dynamics were at play when Alaska Airlines proposed acquiring Hawaiian Airlines for $1.9 billion.
The outcome of these mergers could be significant for both the companies involved and the US airline industry as a whole. Currently, four companies control over two-thirds of the national market and exert dominance over major airports in Atlanta, Dallas-Fort Worth, and Newark. If one or both of these mergers are approved, they would be the largest in years.
The last major wave of airline mergers occurred in 2013 when American Airlines combined with US Airways. Now, the industry is dominated by Delta Air Lines, United Airlines, and Southwest Airlines. These large carriers control numerous gates and landing slots at their hub airports, making it unlikely that they will lose a significant number of travelers. Additionally, their size allows them to negotiate better deals for planes and equipment.
JetBlue argued in a federal antitrust case that the power of the big four airlines is immense and smaller airlines need to merge in order to compete. However, the Justice Department countered that the acquisition would eliminate competition and lead to higher fares for consumers. If JetBlue completes the acquisition, it would have a market share of over 10%, compared to United’s 16% share.
The government argued that the merger would reduce competition on 262 routes where the airlines currently compete. Analysis of data from Cirium suggests that the merger would increase JetBlue’s market share on more than a dozen routes to over 50%. The Justice Department estimated that the deal could cost consumers $1 billion to $2 billion annually in higher fares.
JetBlue defended the merger by highlighting its history of disrupting the industry and its plans to lure away passengers from the big airlines. The airline also stated that it would give up access to some airport slots in New York, Boston, and Florida to address concerns about market dominance.
It is widely acknowledged that the airline industry has become overly concentrated, and the Biden administration is seeking to prevent further consolidation. However, experts believe that this strategy may not make the industry more competitive, especially at airports where the big four airlines are already dominant.
If the merger is approved, JetBlue would significantly expand its fleet and workforce, operating over 450 planes and employing about 34,000 people. JetBlue primarily operates in Boston, New York, Los Angeles, and various destinations in Florida, while Spirit’s network is more widespread but particularly dense in Florida and the East.
The judge has not yet announced when a final decision will be issued.