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Allegiant and Frontier to Make Big Gains if JetBlue-Spirit Merger Approved

Edward Russell

September 11th, 2023

Allegiant Plane in San Diego

Budget airlines Allegiant Air and Frontier Airlines stand to make big gains at some of the busiest U.S. airports if officials signs off on JetBlue Airways’ proposed $3.8 billion merger with Spirit Airlines.

Allegiant would receive Spirit’s assets at Boston Logan and Newark airports, and Frontier its assets at New York LaGuardia under divestiture agreements reached by JetBlue, the New York-based airline said Monday. JetBlue would also work with the operator of the Fort Lauderdale airport, Broward County, to make five gates currently used by Spirit available to Allegiant.

The agreements between JetBlue and both Allegiant and Frontier are subject to the merger’s approval by U.S. authorities, which to date have opposed it. The Justice Department has sued to block the combination on antitrust concerns with the trial scheduled to begin in October.

“Merging with Spirit will allow us to bring our signature service and low fares to even more people and places across the country and beyond,” JetBlue CEO Robin Hayes said in a statement. “Our divestiture commitment … is aimed at removing any doubt of our commitment to promoting competition.”

JetBlue and Spirit together would be the fifth largest airline in the U.S. with a nearly 9% share of domestic seats based on 2023 schedules, according to Cirium Diio data.

Competition is the crux of the DOJ’s concerns with the merger. The combination, the regulator argues, would eliminate the largest budget competitor from the U.S. market. And while JetBlue has promised growth from the deal, the DOJ rightly notes that Spirit is growing rapidly as a standalone airline and, without them in the market, airfares in many markets would likely rise.

And a recent accidental disclosure in a separate civil suit to block the merger supports the DOJ’s argument. Lawyers for the plaintiff, in an incorrectly redacted summary of JetBlue internal documents, said the airline plans to raise airfares 24-40% on Spirit routes. JetBlue has denied the disclosure, and said that it was an “inaccurate picture of the facts.”

Inaccurate or not, history shows that when airline competition decreases, airfares go up.

Divesting gates and other assets to discounters Allegiant and Frontier aims to alleviate those concerns. And the agreements are a big deal. Boston, Newark, and New York LaGuardia are among the most sought-after airports for airlines to serve, but also some of the most difficult to access due to their lack of gates, flight slots, or runway timings. The network carriers American Airlines, Delta Air Lines, and United Airlines, thanks to their decades of flying and past mergers, dominate these airports.

In September, Allegiant is operating on average one flight a day to Boston, Cirium Diio schedules show. That translates to two flights a day several days a week — either to Asheville, Grand Rapids, Knoxville, or Sarasota-Bradenton — and zero flights on other days. Gaining Spirit’s two gates in Boston would allow Allegiant, if it grew to the same size as Spirit is today at the airport, to expand its schedule 14-fold.

Similarly, Spirit’s two gates and 53 runway timings at Newark would allow Allegiant to grow its average of 1.6 flights a day nearly 18 fold, according to Cirium Diio.

“We are committed to long-term growth, especially in areas such as New York, Boston, and Florida,” Allegiant Chief Revenue Officer Drew Wells said in a statement. “This agreement will allow us to expand our service in these cities.”

Frontier would take Spirit’s six gates and 22 slots at LaGuardia under a deal unveiled in June if the merger is approved. The agreement would not be as transformative for Frontier at the airport (which it already serves from Atlanta, Dallas-Fort Worth, and Orlando) as for Allegiant in Boston and Newark, but it would allow Frontier to quadruple the size of its operation at LaGuardia, Diio Cirium data show.

The divestiture agreements may be moot as far as the DOJ is concerned. Officials at the regulator have expressed greater concerns about competition on specific routes — say, for example, between Boston and Fort Lauderdale — than at airports generally.

The deals reached by JetBlue with Allegiant and Frontier say nothing about how either airline must use Spirit’s assets in Boston or New York. In other words, Allegiant and Frontier could use the gates and slots however they please, and not necessarily to replace Spirit between Boston and Fort Lauderdale.

JetBlue ended a lucrative alliance with American in Boston and New York in July, after an adverse court ruling, which some believe might help its case for the merger. It had the option of appealing the court decision but opted not to. In any case, the DOJ previously said that it had antitrust concerns even without the JetBlue-American tie-up.

If approved, JetBlue aims to close the merger with Spirit in the first half of 2024.

Edward Russell

September 11th, 2023

Tags: North America

Photo credit: Allegiant Plane in San Diego Flickr / San Diego International Airport

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