JetBlue CEO Robin Hayes this week reiterated his commitments to fight the Department of Justice over his planned Spirit merger and to stick with partner American Airlines in their Northeast Alliance, which is now nearly three years old. The CEOs of American and United encouraged both strategies.
All three CEOs spoke at the JP Morgan Industrials conference, where they were questioned by analyst Jamie Baker, who asked all three about JetBlue’s concurrent battles against DOJ lawsuits. He asked American CEO Robert Isom whether there is a Plan B in case JetBlue were to bargain with regulators, giving up the NEA to protect the planned merger, a hypothetical scenario. “We’re really confident in the NEA,” Isom responded. “The NEA is producing value. Everything we have done has produced consumer benefit. I’m not looking at Plan B.”
Baker asked United CEO Scott Kirby his views on JetBlue’s two deals. Regarding the merger, Kirby responded, “To say an airline can’t combine, to be fifth largest in the world when scale matters, if I was Robin, I’d be spitting mad. That does not seem fair.” When Baker asked, “Is the NEA fair?” Kirby said, “We don’t have a dog in the hunt on either of those. We’re winning market share. I like our competitive position either way.” United has long maintained that its Newark hub is the best hub in the New York market.
Additionally, Kirby noted, “Doing deals is complicated. That helps us.” And later, Baker questioned Hayes about the carrier’s ability to pull off a merger with dissimilar Spirit. “Integration always seems to be harder than what people plan for,” Baker said. “You’ve grown something from scratch, but you have not mated.”
Hayes responded that JetBlue has established “a team focused on integration,” with members from JetBlue, outside consultants, and people with merger experience at other airlines. “We want the most serious integration in airline history,” he said, even suggesting that the delay posed by DOJ opposition will give JetBlue more time to prepare. Integration will go more smoothly than it has in other cases, he said, because of the single Airbus 320 family fleet type, the prior discussion with some unions and the decision, already made, to put everything under the JetBlue name.
Hayes said the Alaska/Virgin America decision faced “a brand question” as the Virgin name remained temporarily in place. When Baker mentioned that in the Delta/Northwest merger, the two carriers “did the same thing for a living, (while) yours is assimilation of differentiated models into your own unique model,” Hayes responded that JetBlue/Spirit does not face the same fleet challenges. “It’s not a perfect process,” he said. “It’s extremely difficult. But I think we’ve set it up well.”
For an airline, JetBlue spends a lot of time battling the Department of Justice.
JetBlue first offered to buy Spirit in April 2022. Spirit was opposed at first, but in July the parties agreed to a $3.8 billion purchase. On May 7, the DOJ filed an antitrust lawsuit to block the merger, saying it would eliminate half of the ultra-low-cost capacity in the United States, leading to higher fares.
The Northeast Alliance, announced in July 2020, enables American and JetBlue to coordinate their schedules at Northeast airports. In September 2021 DOJ sued to block it. The case was tried in September 2022 in US District Court in Boston. DOJ called it a “de facto merger,” but American and JetBlue argued that the lawsuit lacks proof of market wide anti-competitive impact.
When Baker asked “What is taking so long with the case for the NEA?” Hayes noted that the case was tried in September. “We’re waiting to hear,” he said. “It doesn’t really change anything. We are operating the NEA today.” He noted that this summer, the arrangement will enter its fourth year. “The benefits are there for everyone to see,” he said. “JetBlue has never been bigger in New York (and) we’ve grown Boston because of the NEA.”
Later during questioning about JetBlue fuel costs, Hayes noted the most of the carrier’s jet fuel costs are set in New York, where costs are relatively higher. “We don’t see any relief in New York Harbor,” he said. “We’ve stepped into hedging to try to release at least that part of the pricing construct. It’s frustrating to us when our fuel guide is always higher.
“That’s another plug for the merger,” he said. Spirit’s widespread operations would enable JetBlue to have a smaller share of its presence in New York and Boston.