JetBlue Releases Analysis Further Demonstrating Procompetitive Benefits of Combination with Spirit

Rhea-AI Summary

JetBlue's latest data shows it is over three times more effective than Spirit Airlines at reducing fares of legacy carriers, a phenomenon termed the 'JetBlue Effect'. The merger between JetBlue and Spirit, which has limited route overlap, is expected to enhance competition against the Big Four airlines, who control 80% of the market. Notable commitments include divesting Spirit's assets in Boston and New York to ultra-low-cost carriers (ULCCs), addressing regulatory concerns. The merger aims to provide increased competition and lower fares while expanding JetBlue's market share to 9%.

Positive

• JetBlue is over 3x more effective than Spirit at lowering competitor fares.
• Limited overlap between JetBlue and Spirit allows for enhanced competition against dominant airlines.
• JetBlue's merger will result in increased scale and competitive pricing on more routes.
• Proposed divestitures will significantly reduce any overlap concerns and support ULCC growth.

Negative

• None.

Data Shows JetBlue Is Over Three Times More Effective at Lowering Legacy Fares Than Spirit; JetBlue and Spirit Have Little Overlap; Combination Will Increase Competition; ULCCs Will Continue to Grow, Including through Acquiring Divested Assets

NEW YORK--(BUSINESS WIRE)-- JetBlue (NASDAQ: JBLU) today released updated data, which further supports the disruptive role of the airline on the dominant, higher-price legacy carriers, and the pro-competitive impact the merger with Spirit will have on the industry.

Analysis Adds to Compelling Rationale for JetBlue-Spirit Combination

• JetBlue is over 3x more effective than Spirit at bringing down competitor fares. JetBlue’s unique combination of low fares and great service is a competitive force that keeps the legacy carriers on their toes and results in lower fares. This is the “JetBlue Effect,” an outcome specifically cited by the U.S. Department of Justice. An economic analysis found that JetBlue is proven on average to be over 3x as effective at lowering legacy carrier nonstop fares than Spirit. With the scale unlocked by combining with Spirit, JetBlue will be able to bring down legacy carrier fares on more routes, benefitting more travelers than if JetBlue and Spirit continued as standalone airlines.
• JetBlue and Spirit primarily compete with other carriers not each other. According to a third-party source published in April 2022 and reaffirmed with more recent data, JetBlue and Spirit have very limited overlap, and only overlap on 11% or less of the nonstop routes on which both of them fly. Instead, both carriers primarily compete against the dominant Big Four airlines.
• Proposed divestitures materially reduce limited overlap. To address potential concerns around the limited overlap between JetBlue and Spirit, JetBlue has already made unprecedented upfront commitments to divest all of Spirit’s holdings in Boston and New York, as well as five gates and related assets at Fort Lauderdale, to allow for allocation to other ultra-low-cost carriers (ULCCs). These divestitures significantly reduce the already small number of nonstop overlap routes flown by JetBlue and Spirit.
• ULCCs are growing rapidly and have expressed high demand for divested assets. There is significant ULCC demand for all of JetBlue’s proposed divestitures, highlighting the attractiveness of these markets as the rapidly growing ULCCs seek additional opportunities for further growth. Further, the ULCCs are also well-positioned to continue their aggressive expansion and begin serving overlapping routes, with hundreds of aircraft on order that can service these routes.
• The combination of JetBlue and Spirit plus the rapid growth of ULCCs will assure increased competition and low fares. JetBlue competes for all customers, and its Blue Basic Fare offers customers a competitive, low-price option to save more money. In addition, because many Spirit aircraft will continue to fly in their current configuration during the retrofitting process after the transaction closes, there will be no short-term change in capacity. As JetBlue retrofits Spirit's aircraft with its leading customer-focused experience (e.g., adding more leg room and other onboard amenities), the combined airline will be able to meaningfully increase aircraft utilization, offsetting seats removed in the retrofitting process by adding more flights. This will result in more seats with Blue Basic Fares, and coupled with the rapid growth of the ULCCs, will create a more competitive environment and ongoing access for the most price-sensitive customers.

JetBlue-Spirit Combination Is Solution to the Lack of Competition for the Big Four

The Big Four airlines have a lock on about 80% of the market. JetBlue’s combination with Spirit allows it to create a compelling national challenger to these dominant airlines, while also ensuring ULCC options remain available in overlap markets.

While JetBlue, with its highly unique combination of low fares and great service, will be able to expand with new national breadth as a result of the transaction, it will remain a significantly smaller player than each of the Big Four airlines. According to the data, a combined JetBlue and Spirit will have only about 9% market share, compared to about 16-24% for each of the four largest airlines, but the added scale and ability to further grow will result in meaningful competition on more routes to more destinations and greater opportunities for Crewmembers and Team Members of both airlines.

About JetBlue

JetBlue is New York's Hometown Airline®, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles, Orlando, and San Juan. JetBlue carries customers to more than 100 destinations throughout the United States, Latin America, Caribbean, Canada, and United Kingdom. For more information and the best fares, visit jetblue.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230306005730/en/

JetBlue Corporate Communications

Tel: +1.718.709.3089

corpcomm@jetblue.com

Source: JetBlue

FAQ

What is the impact of JetBlue's merger with Spirit Airlines on fares?

JetBlue is expected to lower legacy carrier fares significantly, being over three times more effective than Spirit.

How does JetBlue's market share compare to the Big Four airlines post-merger?

Post-merger, JetBlue's market share will be approximately 9%, significantly smaller than the 16-24% of each Big Four airline.

What are the planned divestitures associated with JetBlue's merger with Spirit?

JetBlue plans to divest Spirit's assets in Boston and New York, along with five gates in Fort Lauderdale, to support ULCC expansion.

How will JetBlue's merger with Spirit affect competition in the airline industry?

The merger is aimed at increasing competition against the Big Four airlines and providing more low-fare options for travelers.

What is the 'JetBlue Effect' mentioned in the press release?

The 'JetBlue Effect' refers to how JetBlue's services lead to lower fares from legacy airline competitors.