Opinion | Mergers Like JetBlue’s Proposed Acquisition of Spirit Usually Turn Out to Be Bad
Most of the time, however, mergers that seem bad really are bad. A comprehensive meta-analysis of 50 studies covering more than 3,000 contested mergers in the United States in recent decades found that “most studied mergers result in competitive harm, usually in the form of higher price.” Whether it’s the combination of Ticketmaster and LiveNation to dominate event ticketing, the acquisition of Sprint by T-Mobile, the buyout of Instagram by Facebook or the consolidation of meatpacking and agricultural products, too many plainly competition-stifling mergers have been greenlit.
And now we have the effort to eliminate Spirit. How does JetBlue purport to argue that the merger won’t “substantially lessen competition”? Its lawyers and lobbyists have constructed a narrative about how, after it acquires Spirit, a larger JetBlue will compete more effectively with Delta, United and American — and thus eventually bring prices down.
But this story of the little guys joining forces to fight the big guys is a made-for-trial fantasy. JetBlue’s largest shareholders are also, it happens, major owners of United, Delta and American. It is in neither the investors’ nor JetBlue’s management’s interests to pick a fight with the big guys. They would benefit more from working in harmony to reduce the number of seats available, keep prices high and downgrade frequent flier points. That is the proven path to profit in the industry.
That JetBlue operates at the mercy of its main investors has been clear since 2014. There was a time, back at the turn of the century, when JetBlue was a genuinely innovative airline. Its first chief executives, David Neeleman and David Barger, were idealists of a sort, delivering leather seats in economy class with comfortable legroom. The early JetBlue was popular: small and friendly and cheaper than, say, American.
It was also profitable — but not profitable enough. In 2014, Wall Street analysts turned on JetBlue and its chief executive at the time, Mr. Barger, accusing the company of being too consumer-focused. Investors demanded more fees and the cutting of less profitable routes. Unfortunately for customers, Wall Street won, Mr. Barger was thrown out and JetBlue started charging fees for all sorts of things. It is now just as money-grubbing and unexceptional in service as the bigger airlines.
