JetBlue (JBLU) - Get Free Report and Spirit Airlines (SAVE) - Get Free Report have agreed to a $3.8 billion merger deal but federal regulators have to decide whether to allow the two companies to actually combine. It's really a simple case of which argument you believe.
Spirit and JetBlue have made the case that the combination will bring lower fares for customers.
"With a larger platform for growth, we will introduce JetBlue’s unique value proposition of low fares and a great experience on more routes. It is well-documented that when JetBlue enters new routes, the legacy carriers respond and lower their fares (the 'JetBlue effect'). In fact, economic analysis shows that JetBlue’s presence on a nonstop route decreases legacy fares by 16%. This means more airline customers benefit when JetBlue takes on a new legacy-dominated route," the two companies shared on a website about the merger.
The Transport Workers Union (TWU), which represents 6,800 JetBlue flight attendants does not believe the merger will have a positive impact on consumers or workers.
“We have yet to see a credible argument that a consolidated JetBlue/Spirit will enhance competition in the domestic airline industry. Workers and passengers will be harmed, just as they have been in many past airline consolidations, as the new airline follows the business practices, pricing strategies, and labor cost-cutting practices previous combined carriers have undergone,' the union shared in a letter to Attorney General Merrick Garland and Transportation Secretary Pete Buttigieg.
Is Jetblue/Spirit a Monopoly or Another Competitor In a Crowded Space?
The Biden administration "is likely to sue to block a pending $3.8 billion merger between JetBlue and Spirit airlines," according to Politico.
If the merger goes through it would create the fifth-largest airline in the United States. JetBlue and Spirit have argued that the combined company will be better able to compete in a very crowded marketplace.
"The combination of JetBlue and Spirit will unleash a customer-centric, low-fare challenger to the dominant 'Big Four' airlines," the two companies shared on a website designed to advocate for and answer question about the merger. "After closing, we will bring together the best of both airlines, expanding our award-winning service, offering new routes, and ultimately providing greater choice to more customers and communities, while continuing to offer low fares."
The Biden administration has taken an aggressive position in favor of promoting competition. JetBlue and Spirit have attempted to make the case that combining will add, not take away, competition in the space.
"Ultimately, more customers will benefit from JetBlue’s unparalleled value proposition as we add new routes and destinations and accelerate our position as a compelling national challenger that brings down fares and benefits customers," the airlines shared.
JetBlue and Spirit Flight Attendants Disagree
While the TWU made a case that passengers would be harmed by the merger, most of its letter focuses on the impact to workers. The letter does say that the merger could put its "hard-fought collective bargaining agreements -- which also enhances customer experience -- at risk."
The TWU made it clear that more than 1,300 workers at JetBlue headquarters and as many as 8,000 frontline workers based in New York could lose their jobs if the deal goes through.
“There is no question that allowing this group to acquire a new airline will severely undermine the pay and benefits of workers across the entire airline industry, create a de facto monopoly, and undermine customer choices and experience,” said TWU International President John Samuelsen. “The federal government should be looking at this proposed merger with a high degree of skepticism. We are calling on this, the most pro-worker, pro-consumer administration in decades, to use every tool available to halt this disastrous, anti-worker, anti-competition hostile takeover as soon as humanly possible.”
The Association of Flight Attendants-CWA (AFA), which represents 5,600 Spirit Attendants, takes the opposite view.
“After securing improvements and protections for Spirit Flight Attendants in recent days, we are excited to announce our strong support for the JetBlue-Spirit merger,” AFA President Sara Nelson said. “Our union has experience with eight mergers in the past ten years. We agree with skeptics that consolidation has accrued extraordinary power to a few airlines. However, this merger will help to correct that. The JetBlue-Spirit merger adds competition to the airline industry that creates more power for workers, along with choice and comfort that benefits consumers."
This article originally appeared The Street