The Department of Transportation (DOT) under Secretary Pete Buttigieg has announced a more aggressive approach towards airline mergers, signaling a departure from its previous hands-off stance on competition within the industry. This shift in policy comes as the DOT supports the Department of Justice’s (DOJ) lawsuit to block the proposed merger between JetBlue and Spirit Airlines.
During a speech at the Roosevelt Library, Buttigieg acknowledged the need to evaluate competition in the transportation sector. While he refrained from commenting directly on the ongoing JetBlue-Spirit merger trial in Boston, he expressed support for the DOJ’s position. The DOJ filed a lawsuit in March, arguing that the merger would result in higher fares as the newly merged airline plans to reduce the number of seats and integrate the ultra-low-cost carrier Spirit into JetBlue.
JetBlue has defended the merger, claiming that it is necessary to effectively compete with the four largest airlines in the United States: American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. However, the trial, which began on October 31, is expected to last 20 days, with a decision potentially taking months to be issued.
Buttigieg also referenced the Airline Deregulation Act of 1978, which aimed to promote competition within the industry by removing government control over fares, routes, and market entry for carriers. However, a series of mergers following the legislation led to consolidation, resulting in the dominance of the “Big Four” U.S. carriers: American, Delta, Southwest, and United, which currently control approximately 80% of the market.
The DOT’s historical position on airline mergers has been more neutral, typically deferring to the DOJ’s judgment on whether to approve or block a merger. Buttigieg’s remarks represent a departure from this approach and align with the Biden Administration’s tougher stance on mergers, as evidenced by the DOJ’s increased efforts to block mergers in various industries.
Over the past two decades, the government has approved mergers such as American-US Airways, United Continental, Delta-Northwest, and Southwest Air-Tran. While these mergers have led to a consolidated industry, smaller airlines have faced challenges in expanding their networks.
The outcome of the JetBlue-Spirit merger remains uncertain, but Buttigieg’s comments highlight the lack of competition within the airline industry. He emphasized that while it is not feasible to revert to the days of the Civil Aeronautics Board dictating airfares, there is a need to address the current state of affairs.
In conclusion, the DOT’s shift towards a more hawkish stance on airline mergers, as expressed by Secretary Pete Buttigieg, marks a significant departure from previous policy. This change aligns with the Biden Administration’s tougher approach to mergers across various industries. The ongoing trial regarding the JetBlue-Spirit merger underscores the lack of competition within the airline industry, raising questions about the future landscape of the sector.