JetBlue Releases Analysis Further Demonstrating Procompetitive Benefits of Combination with Spirit
March 06 2023 - 1:25PM
Business Wire
Data Shows JetBlue Is Over Three Times More
Effective at Lowering Legacy Fares Than Spirit; JetBlue and Spirit
Have Little Overlap; Combination Will Increase Competition; ULCCs
Will Continue to Grow, Including through Acquiring Divested
Assets
JetBlue (NASDAQ: JBLU) today released updated data, which
further supports the disruptive role of the airline on the
dominant, higher-price legacy carriers, and the pro-competitive
impact the merger with Spirit will have on the industry.
Analysis Adds to Compelling Rationale for JetBlue-Spirit
Combination
- JetBlue is over 3x more effective than Spirit at bringing
down competitor fares. JetBlue’s unique combination of low
fares and great service is a competitive force that keeps the
legacy carriers on their toes and results in lower fares. This is
the “JetBlue Effect,” an outcome specifically cited by the U.S.
Department of Justice. An economic analysis found that JetBlue is
proven on average to be over 3x as effective at lowering legacy
carrier nonstop fares than Spirit. With the scale unlocked by
combining with Spirit, JetBlue will be able to bring down legacy
carrier fares on more routes, benefitting more travelers than if
JetBlue and Spirit continued as standalone airlines.
- JetBlue and Spirit primarily compete with other carriers not
each other. According to a third-party source published in
April 2022 and reaffirmed with more recent data, JetBlue and Spirit
have very limited overlap, and only overlap on 11% or less of the
nonstop routes on which both of them fly. Instead, both carriers
primarily compete against the dominant Big Four airlines.
- Proposed divestitures materially reduce limited overlap.
To address potential concerns around the limited overlap between
JetBlue and Spirit, JetBlue has already made unprecedented upfront
commitments to divest all of Spirit’s holdings in Boston and New
York, as well as five gates and related assets at Fort Lauderdale,
to allow for allocation to other ultra-low-cost carriers (ULCCs).
These divestitures significantly reduce the already small number of
nonstop overlap routes flown by JetBlue and Spirit.
- ULCCs are growing rapidly and have expressed high demand for
divested assets. There is significant ULCC demand for all of
JetBlue’s proposed divestitures, highlighting the attractiveness of
these markets as the rapidly growing ULCCs seek additional
opportunities for further growth. Further, the ULCCs are also
well-positioned to continue their aggressive expansion and begin
serving overlapping routes, with hundreds of aircraft on order that
can service these routes.
- The combination of JetBlue and Spirit plus the rapid growth
of ULCCs will assure increased competition and low fares.
JetBlue competes for all customers, and its Blue Basic Fare offers
customers a competitive, low-price option to save more money. In
addition, because many Spirit aircraft will continue to fly in
their current configuration during the retrofitting process after
the transaction closes, there will be no short-term change in
capacity. As JetBlue retrofits Spirit's aircraft with its leading
customer-focused experience (e.g., adding more leg room and other
onboard amenities), the combined airline will be able to
meaningfully increase aircraft utilization, offsetting seats
removed in the retrofitting process by adding more flights. This
will result in more seats with Blue Basic Fares, and coupled with
the rapid growth of the ULCCs, will create a more competitive
environment and ongoing access for the most price-sensitive
customers.
JetBlue-Spirit Combination Is Solution to the Lack of
Competition for the Big Four
The Big Four airlines have a lock on about 80% of the market.
JetBlue’s combination with Spirit allows it to create a compelling
national challenger to these dominant airlines, while also ensuring
ULCC options remain available in overlap markets.
While JetBlue, with its highly unique combination of low fares
and great service, will be able to expand with new national breadth
as a result of the transaction, it will remain a significantly
smaller player than each of the Big Four airlines. According to the
data, a combined JetBlue and Spirit will have only about 9% market
share, compared to about 16-24% for each of the four largest
airlines, but the added scale and ability to further grow will
result in meaningful competition on more routes to more
destinations and greater opportunities for Crewmembers and Team
Members of both airlines.
About JetBlue
JetBlue is New York's Hometown Airline®, and a leading carrier
in Boston, Fort Lauderdale-Hollywood, Los Angeles, Orlando, and San
Juan. JetBlue carries customers to more than 100 destinations
throughout the United States, Latin America, Caribbean, Canada, and
United Kingdom. For more information and the best fares, visit
jetblue.com.
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JetBlue Corporate Communications Tel: +1.718.709.3089
corpcomm@jetblue.com
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