The airline industry is no stranger to mergers and acquisitions, such as our own Reno Air getting acquired by American Airlines in 1998. Earlier this year, we saw the U.S. Department of Justice sue to block JetBlue’s planned acquisition of Spirit Airlines, a decision that can have ripple effects throughout the airline industry in our state. With an issue as important as air travel to our community, it’s important that we gain a full understanding of how this merger could potentially affect the affordability of air travel and the travel routes that are crucial to the tourism and other economic industries of Northern Nevada.
Today, four airlines — American, Delta, Southwest and United — control 80 percent of domestic air travel, meaning they have a large say in the average rate of costs and customer service. JetBlue argues that their acquisition of Spirit would create a new competitor to the “Big Four” and bring more competition into that upper echelon of airlines while also lowering fares for Nevadans and those coming to visit the Silver State for work and play.
There is evidence that shows when JetBlue enters new routes the legacy carriers respond and lower their fares, a trend the U.S. Department of Justice called in 2021 the "JetBlue Effect." JetBlue says that this merger also would bring about an expansion of JetBlue routes, potentially leading to more cost benefits when JetBlue takes on a new legacy dominated route.
However, the U.S. Department of Justice argues in their suit that this merger would also eliminate the "Spirit Effect,” where Spirit's presence in a market forces the large airlines, including JetBlue, to lower their fares to compete. Spirit also is a leader in the ultra-low-cost flight tier, which could be at risk if JetBlue decides to raise their fares.
JetBlue is also discussing potential future growth in Nevada. If the merger is approved, JetBlue would have over 1,700 crew members and operate 90 flights a day in the state, becoming the second-largest airline in Las Vegas with additional plans to expand. JetBlue also promises to continue Spirit's direct routes from Las Vegas to Reno, including the only non-stop flight to New York.
A merger of this size could take some time to complete, with many consumers not seeing the potential benefits until later down the line. While JetBlue says that it will only take 30 days to repaint the colors and change the interior of a Spirit plane, they acknowledge that the full transition could take years. Integrating two airlines' operations, IT systems, corporate structure, and procedures is a complex undertaking. The potential disruptions during the integration process could impact the airlines' ability to maintain on-time performance and operational reliability, leading to customer dissatisfaction.
As a region with a growing set of national and international businesses and a strong tourism sector, the health of the airline industry is vitally important to us. JetBlue and Spirit’s merger could bring significant expansion of routes and increased job investment, but also raises legitimate concerns about competition in the industry and the risk of consolidating airlines.
Those who are interested in making their voice heard on the proposed merger to the Department of Justice and Department of Transportation can do so at regulations.gov.
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