To have its major $3.8 billion acquisition approved, JetBlue Airways is prepared to give up Spirit's position in New York City.
The New York-based carrier disclosed on Thursday that, as part of JetBlue's bid to acquire Spirit, it had struck an agreement with Frontier to transfer all of Spirit's properties at the New York LaGuardia Airport (LGA).
After the transaction is completed successfully, JetBlue will transfer six gates and 22 slots, or takeoff and landing licenses, to Frontier. Frontier will be able to use these assets to expand its ultra-low-cost service out of the New York City airport, which many people believe to be the most convenient in the region.
The successful completion of the acquisition, which JetBlue anticipates will occur in the first half of 2024, is a requirement for these divestitures, which are a part of the upfront promises made by JetBlue in the merger agreement.
The Department of Justice filed a lawsuit earlier this year to prohibit the merger, so the airline is already dealing with regulatory challenges as a result.
Although the complaint has not yet been heard in court, JetBlue's legal department appears ready to negotiate and make certain changes to have the merger allowed.
The Department of Justice thinks that a combination between JetBlue and Spirit will ultimately result in higher airfares since it would eliminate a significant low-cost airline and reduce the number of available seats.
This stance is in contrast to earlier history, where mergers like American-US Airways, United-Continental, Delta-Northwest, and Southwest-AirTran were permitted by the government.
If the merger is allowed, JetBlue intends to fully integrate Spirit into its current business by absorbing all of the airline's assets and making it the fifth-largest airline in the United States.
As American, Delta, Southwest, and United together account for over 80% of the country's aviation industry, JetBlue claims that the merger is necessary for it to compete more effectively against them.
JetBlue has already made an effort to secure support for the merger from local governments and elected authorities. One such person is Florida Attorney General Ashley Moody, who collaborated with JetBlue to guarantee that the planned merger will result in at least 2,000 additional jobs in Florida.
JetBlue is willing to maintain the same level of ultra-low-cost competition in New York by handing Frontier all of Spirit's gates and slots, which is possibly the most capacity-restricted airspace in the nation.
"We are dedicated to making sure that access to ultra-low-cost carriers in New York is preserved as a result of our merger with Spirit. According to a statement from Robin Hayes, CEO of JetBlue, "We are pleased that this agreement with Frontier will maintain the same level of ultra-low-cost carrier service at LaGuardia Airport."
JetBlue has encountered a legal snag in its second prominent litigation with the Justice Department while being prepared to move forward with its acquisition of Spirit.
The Northeast Alliance between American Airlines and JetBlue was rejected by that decision, which was made on May 19. According to Judge Leo T. Sorokin, the agreement "substantially diminishes competition in the domestic market for air travel."
The two carriers have 30 days to dissolve their agreement, with the possibility of an appeal or a postponement of the termination date.
Robert Isom, the CEO of American, said on Wednesday that the company would challenge the DOJ's decision. JetBlue, meanwhile, declined to comment and said it was still considering its options for the Northeast Alliance.
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