#Jetblue is trying to buy #SpiritAirlines. It's a terrible idea. Consolidation in the US aviation industry has resulted in higher fares, less reliable planes, spiraling junk-fees, and brutal conditions for flight- and ground-crews. The four remaining US major airlines, who gobbled their rivals, are three times more profitable than their European counterparts:
1/
If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
https://pluralistic.net/2023/03/12/they-put-it-in-writing/#that-was-then
2/
That's great news if you're an airline shareholder. It's terrible news if you're hunting for your lost bags, or if you're a flight attendant or pilot being squeezed, or if you're being hit for billions in covid bailouts - or if you're one of *million Americans* who were stranded during Christmas week by the failure of #SouthwestAirlines' IT systems, which use duct-tape and wishful thinking to hold together the IT systems of all the airlines #SWA bought:
https://pluralistic.net/2023/01/16/for-petes-sake/#unfair-and-deceptive
3/
The collapse of competition in the US airline industry is the result of a deliberate policy, the "#ConsumerWelfare" theory of #antitrust, which says that #monopolies are "efficient" and good for the public. It's a theory that took root under #Reagan, and was reaffirmed and expanded by every president, R or D, since.
4/
Until now. For the first time in two generations, the Biden administration has taken up the neglected, noble art of #trustbusting, blocking mergers and promising to break up the mergers we've already seen, through enforcers like #JonathanKanter at the DoJ Antitrust Division and #LinaKhan at the #FTC:
https://www.eff.org/deeplinks/2021/08/party-its-1979-og-antitrust-back-baby
5/
President Biden’s July 9 Executive Order on Promoting Competition in the American Economy is a highly technical, 72-part, fine-grained memo on how to address the ways market concentration harms our lives as workers, citizens, consumers, and beyond. To a casual reader, this may seem like a dry bit...
Which is bad news for the proposed Jetblue/Spirit merger. Last week, the #DoJ filed suit to block the merger, joined by the AGs from #NY, #MA and #DC.
https://storage.courtlistener.com/recap/gov.uscourts.mad.254267/gov.uscourts.mad.254267.1.0.pdf
Notably, Pete Buttigieg - who has been historically shy of using his prodigious powers as the boss of a large agency - will also block the merger:
6/
Spirit's shares are in the toilet. Writing in his BIG newsletter, #MattStoller explains why shareholders are bolting for the doors: the case against the Jetblue/Spirit merger is *incredibly* strong. A slam-dunk, even:
https://mattstoller.substack.com/p/an-end-to-airline-consolidation
Spirit, after all, is America's most famous budget airline. That means that it attracts fliers by undercutting the Big Four.
7/
That puts downward pressure on the Big Four, who are faced with the choice of taking lower profits to retain fliers' business, or losing *all* the profit when those fliers take Spirit. Remove Spirit from play and that downward pressure on fares disappears.
8/
You don't need newfangled #NeoBrandeisian antitrust to see why this is bad - even under "consumer welfare" antitrust, anything that will obviously make prices go up is prohibited (indeed, this is the *only* thing consumer welfare antitrust cares about).
How do we know that a Jetblue/Spirit merger is a price-increasing, illegal antitrust violation? *Spirit says so*.
9/
This is truly delicious! You see, last year, there was a bidding war for Spirit and Jetblue was the outside bidder. Spirit's board wanted to convince their shareholders to reject Jetblue's bid, so they commissioned some aviation economists to do a study on the matter, which Spirit then circulated to its investors.
10/
That report is unequivocal: it estimates that a Jetblue/Spirit merger will be a disaster. Spirit's participation in a route lowers fares by 17%. When Spirit stops competing on a route, fares go up by *30%*. Spirit CEO #TedChristie called the proposed merger "unlawful" and "unethical":
https://simpleflying.com/spirit-ceo-shareholder-rejection-jetblue-cynical-disruptive-offer/
11/
Spirit is a major competitor to Jetblue. As Stoller notes, they compete on hundreds of routes, and are adding more all the time. Jetblue clearly understands that removing Spirit as a competitor would let it raise fares.
12/
As one Jetblue manager - quoted by the DoJ - explained: "I don’t think we should be selling the [Spirit] fare if [Spirit] is not serving the market." Jetblue's internal memos on the merger include an executive stating that the merger will allow the airline to realize "efficiencies" by reducing service and increasing fares. This isn't the kind of "efficiency" we want.
Stoller notes that even with this damning evidence, there are still some spoilers.
13/
Florida governor #RonDeSantis has cut a deal to back the merger, even though #Florida stands to suffer the most of any state from this merger due to the number of Spirit flights taking off from its airports. And, Stoller notes, the judge presiding over the case is an 82 year old Reagan appointee - a ideology-addled dotard named William Young.
14/
But, Stoller notes, with Buttigieg and the #DOT on the case, it's hard to see how this merger can go through - the DOT has very broad powers to block mergers that reduce routes and don't have to meet the same evidentiary standards as the DoJ would in court.
15/
Stoller thinks Buttigieg has had a "moment of truth" - that outside pressure from activists and critics convinced the secretary that his future political fortunes would be better served, on balanced, by boldly using his powers (and pleasing the public), rather than sitting on his hands (and pleasing future industry donors):
https://mattstoller.substack.com/p/pete-buttigiegs-moment-of-truth
16/
If that's so, it's welcome news. While I would prefer that our political leaders acted boldly in the public interest out of a sense of duty, I will happily settle for bold action motivated by fear of the voters' wrath.
eof/
Cory Doctorow
