The landscape when looking for low-cost tickets in the United States may change in the coming months. Airlines Frontier and JetBlue are vying to merge with Spirit – which offers cheap tickets to cities on both coasts of the country – in a deal that will impact travellers.
In February, Spirit and Frontier announced an agreement to create what they say is “the most competitive ultra-low-cost airline” in the United States. The move has been criticized by public interest groups and lawmakers who warn of a different outcome in which we end up paying more when buying our plane tickets.
What was seen as a “final” deal that would be finalized in the second half of this year – although it still requires industry regulator approval – stopped looking that way on Tuesday when another airline, JetBlue , put an unsolicited offer on the table. for Spirit. JetBlue offered to buy it for $3.6 billion in cash, saying in a statement that its offer was “superior” to Frontier’s.
“The combination of the two airlines will position JetBlue as the best domestic low-cost competitor to the four dominant U.S. airlines and expand the reach of the ‘JetBlue Effect,'” the company said in its statement, referring to a ‘who , he says, happens when it enters a new market and traditional airlines respond by lowering their prices.
For now, Spirit has replied that it will evaluate JetBlue’s offer while Frontier has criticized it, saying a “JetBlue-Spirit marriage” would make travel more expensive.
Frontier also raised another outstanding issue in the airline industry: the proposed alliance between JetBlue and American Airlines that has been challenged by the Justice Department on the grounds that it would lessen competition.
“The significant overlap (of their flight routes) on the East Coast of JetBlue and Spirit will reduce competition and limit choices for consumers,” Frontier said in a statement. “It’s surprising that JetBlue is considering a merger like this when the Department of Justice currently has a lawsuit to block its ongoing alliance with American Airlines,” he added.
Which markets are Spirit, Frontier and JetBlue concentrated in?
The mergers with Spirit proposed by both JetBlue and Frontier aim to provide consumers with more or better deals when buying their plane tickets, the two companies said in defense of their initiatives.
But industry data and expert analysis show that the routes of the three airlines overlap in some markets, which calls into question the potential drop in their ticket prices.
If we analyze the proposed merger of Frontier and Spirit, we see that the first concentrates its connections in the west of the country (the company is based in Colorado) and the second in the east (its headquarters are located in Florida), which suggests a synergy that will create a player in a better position to compete with giants like American Airlines, Delta and United, which represent 80% of the American market.
However, currently 18% of the Spirit and Frontier routes overlap or coincide, according to data from supplier Cirium cited by New York Times Yes USA today.
When we look at JetBlue’s offer to acquire Spirit, we see that they are two companies with a strong presence on the East Coast, although their routes coincided last year in a lower percentage, 11%, according to the information from Cirium.
Frontier and JetBlue promise more flights, but they don’t convince lawmakers
The profile of Frontier and Spirit is similar as both are considered ultra-low-cost airlines and this makes their merger more logical for some experts. Frontier said when announcing the deal in February that the combined company would have 1,000 flights a day to 19 countries.
Also that he will be able to resume flights he had suspended to small towns and inaugurate them in others. “There will be better access to ultra-low fares with the new routes to underserved communities across the United States, Latin America and the Caribbean,” Frontier said.
JetBlue, for its part, said a merger with Spirit would help it consolidate existing eastern routes — particularly Florida cities like Fort Lauderdale and Orlando — which would add 1,700 flights a day to 27 countries.
“The transaction will allow JetBlue to expand into its key cities such as Los Angeles, Fort Lauderdale, Orlando and San Juan; as well as into hubs controlled by high-fare dominant airlines including Las Vegas, Dallas, Houston, Chicago , Detroit, Atlanta and Miami,” the company said.
But the promised increase in flights and arrivals in underserved cities does not convince progressive lawmakers and groups who criticize this type of merger.
Just weeks ago, a group of lawmakers, including Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont and New York Rep. Alexandria Ocasio-Cortez, specifically denounced Spirit and Frontier’s proposed merger plan. JetBlue’s offer was not yet known at the time.
They warned that the merger of these two airlines could lead to higher ticket prices just as inflation leaves no respite for the pockets of the country’s consumers. “For decades, the airline industry has been plagued by increasing consolidation, which has produced aviation giants while leaving consumers and workers behind,” they said in a letter to the secretary. at Pete Buttigieg Transportation. .
Given that the proposed merger of Spirit and Frontier threatens to exacerbate this trend, potentially driving up prices at a time of severe inflationary pressures, we are calling on the Department of Justice and the Department of Transportation to take a close look at this mega -merger.