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JetBlue Acquisition of Spirit
A Consumer-Positive Deal Under Attack
By Consumerist Luddites
The administration’s opposition to JetBlue acquiring Spirit has gone to court.
Let’s put this on the table: the DOT and DOJ are playing heartstrings politics with this one, to the detriment of the consumer.
Strategically, it is a brilliant move on the part of B6. It will acquire what is likely to be about a net 180 A320s, assuming the current Spirit fleet of A319s will be retired.
Plus, the deal comes with an orderbook for 49 A320neos, and 86 A321neos. In an environment where the backlog at Airbus is literally years, firm orders have value.
But the biggest asset is that this fleet comes fully equipped with pilots and flight attendants, giving JetBlue the ability to immediately begin to expand.
And that is where the fly hits the ointment. The DOT and consumer gadflies are convinced that this deal will simply raise fares for consumers. Afterall, JetBlue will have fewer seats per airplane, and will offer a product less bare bones than what Spirit offers. So that means higher fares, right?
What confuses the consumerist jihadists is that the seats when JetBlue gets them will be generating more revenue because by and large they will be in different markets with a different product.
It is the product B6 will offer, and more importantly, where it will be offered that is key to the discussion. Today, Spirit largely is focused on discretionary leisure markets based on impulse pricing. JetBlue is structured to access core air service demand. The current Spirit model largely (though not entirely) is aimed at skirting direct competition with the big four – AA/DL/UA/WN. With the aircraft and assets from Spirit, JetBlue will be a stronger direct competitor for the traffic flows of these incumbents.
Now, bank on the opposition to this deal to dive headlong into the DOT data swamp and come up with all sorts of numbers which they don’t understand to support their positions.
One might be just fares. Yessir, the average yields at JetBlue hover in the 13-cent range domestically, according to our friends at Cirium. But the same data for Spirit gravitate around 7-8 cents. That according to the consumer cavalry is prima face proof that JetBlue will raise fares.
Now, factors such as very different reliance on ancillary revenues between the two airlines are not considered. Nor will the fact that the route systems of the two, and the products of the two, and the general passenger base of the two are different.
To Buttigieg and the gang, emotion matters. Political grandstanding matters. Facts not so much so.
There are questions about the financial structure of the deal. But these are separate from the consumer benefit analyses of the acquisition.
Bottom line: if the deal is approved, the consumer wins.