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JetBlue Hits More Turbulence
JetBlue is a company that has been mismanaged for years. Now, that poor management has invited numerous court actions and unwanted ire from the Justice Department.
JetBlue Merger Hits More Turbulance
Organizing
7 November 2022
JetBlue is facing mounting scrutiny over its planned merger with Spirit. A group of airline workers and consumers are filing a court challenge to try and slow the “almost unstoppable” march towards airline megalopoly.
The action comes as JetBlue posts the worst 3rd Quarter profits of any major carrier, earning a dismal $.21 a share, prompting investor concerns that airline management may be underperforming at a critical moment for the carrier. It’s also happening at a time when the airline is facing mounting concerns from the Justice Department over it’s de-facto merger with American in the Northeast markets.CEO Robin Hayes is expected to appear in court to defend the airline’s actions in that case. The airline is also facing questions from unions, who are asking if the company is being irresponsible financially, overpaying investors with what is being called “hush money” in case the deal with Spirit falls through. Unions are also calling for the airline to raise wages and offer better work / life balance for employees.
Flight Crews and consumers filed an injunction asking a Federal Judge to stop the planned $3.8 Billion merger between JetBlue Airways and Spirit Airlines in hopes of preserving one of the few remaining discount carriers in the U.S.
The group filed to stop the deal on Thursday, asking the U.S. District Court for the Northern District of California to block the transaction. The group argues that the new, larger airline could dominate key markets, leaving consumers no choice but to pay ticket prices that are impossible for either airline to command today.
If the merger goes through, the complaint argues, consumers “would not only lose the competition of Spirit, but also the potential competition that JetBlue would provide by building its own national presence the old-fashioned way, by competing for passengers instead of buying them.”
JetBlue is the sixth-largest airline operating in the U.S. Spirit is the seventh. The combined airline would immediately become the fifth-largest air carrier, right behind American, Delta, Southwest, and United.
The complaint argues that Spirit is a significant price-cutting rival of JetBlue and other major carriers and that, if the airline were eliminated from the commercial aviation ecosystem, other airlines would be free to hike fares on consumers. Moreover, the “current trend toward concentration, the lessening of competition, and the tendency to create a monopoly in the airline industry are unmatched and unparalleled,” the suit read.
It goes on to suggest that monopolistic power was the primary goal of the merger. “JetBlue would gain a majority market share on more than a dozen routes where neither it nor Spirit previously dominated, and it would eliminate the price-cutting by Spirit. Therefore, JetBlue made an unsolicited tender offer to purchase Spirit in order to eliminate that competition,” according to the filing.
The complaint states that Spirit is unique in commercial aviation because it’s small enough to survive on smaller ticket prices but large enough to compete against mega-carriers such as United and Southwest.
“Spirit, with its innovative, low-cost service, is an important bulwark against this almost unstoppable trend toward complete concentration and monopoly in the airline industry,” the suit says.
The proposed merger wouldn’t just eliminate another discount option for travelers; it would also remove an essential reason for the four mega-carriers to avoid “abuses” directed toward the flying public. If the Big Four airlines are no longer afraid of losing passengers to Spirit, the result may be skies that are even less friendly than they already are. If the JetBlue / Spirit deal is ultimately allowed to go forward, discount airfares in the U.S. will shrink by 50% overnight.
Earlier in 2022, the Spirit Board and executives concluded that a merger between Spirit and JetBlue could never be approved by regulators and was, therefore, “illusory.” The Board then rejected an earlier offer by JetBlue. JetBlue offered to “sweeten the deal” by paying the shareholders $400 million if the proposed combination failed. Thus the shareholders could move forward with the JetBlue combination without any risks. The $400 million to shareholders was to quiet the shareholder’s knowledge of the potential illegality of the acquisitions and was little more than “hush money” according to the suit.
All of this poses the question, What’s the end game? Is this all intentional? Greed seems to have airlines so vexed that they can’t see that they could be potentially pricing the consumer out, or could it all just be a ploy to create an ecosystem of, “our way or the highway.’ The entire notion of all of this seems to be rooted in a mindset to force customers to either pay the price or seek other transportation options. In doing so this could stand to hurt us all by driving ridership down thusly causing jobs to potentially be cut.
The airline’s pain is self-inflicted, which is puzzling if we assume management at the carrier is competent.
In September, ground Workers at the airline petitioned to unify with the Machinists Union. The National Mediation Board is reviewing the signatures and is expected to schedule an election within the next few weeks. To the surprise of many veteran Union organizers, JetBlue executives seemed to comply with union election rules, opting not to use many of the stalling tactics typical of anti-union companies, which JetBlue historically has been.
Playing by the rules has so far spared JetBlue from raising the hostility of the Department of Transportation, led by strongly pro-union Pete Buttigieg. Were the airline to face the double threat of challenges from both the Justice Department and Transportation, it would suddenly become hard to see the path forward for any merger.
For his part, Secretary Buttigieg has voiced concerns over the growth of non-union companies within America’s transportation networks. The JetBlue / Spirit merger would create another large airline that isn’t completely unionized.
If the Department of Transportation ultimately decides to oppose the deal, it could spell almost certain doom for JetBlue’s acquisition plans. The DOT has the power to unilaterally deem the arrangement to be not in the public’s interest and nix the merger – without needing to go to court or gain the approval of any other agency.
While JetBlue executives seem to understand the dangers the merger could face from an annoyed DOT, Ground Operations supervisors are struggling to grasp the concept. At virtually every JetBlue location, low-level supervisors have been unlawfully engaging in abusive anti-union tactics. Including unlawfully confiscating union property and threatening Crewmembers – all of which have been reported to Federal Regulators.
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JetBlue Merger Hits More Turbulence
7 November 2022
JetBlue is facing mounting scrutiny over its planned merger with Spirit. A group of airline workers and consumers are filing a court challenge to try and slow the “almost unstoppable” march towards airline megalopoly.
The action comes as JetBlue posts the worst 3rd Quarter profits of any major carrier, earning a dismal $.21 a share, prompting investor concerns that airline management may be underperforming at a critical moment for the carrier. It’s also happening at a time when the airline is facing mounting concerns from the Justice Department over its de-facto merger with American in the Northeast markets.CEO Robin Hayes is expected to appear in court to defend the airline’s actions in that case. The airline is also facing questions from unions, who are asking if the company is being irresponsible financially, overpaying investors with what is being called “hush money” in case the deal with Spirit falls through. Unions are also calling for the airline to raise wages and offer better work/life balance for employees.
Flight Crews and consumers filed an injunction asking a Federal Judge to stop the planned $3.8 Billion merger between JetBlue Airways and Spirit Airlines in hopes of preserving one of the few remaining discount carriers in the U.S.
The group filed to stop the deal on Thursday, asking the U.S. District Court for the Northern District of California to block the transaction. The group argues that the new, larger airline could dominate key markets, leaving consumers no choice but to pay ticket prices that are impossible for either airline to command today.
If the merger goes through, the complaint argues, consumers “would not only lose the competition of Spirit, but also the potential competition that JetBlue would provide by building its own national presence the old-fashioned way, by competing for passengers instead of buying them.”
JetBlue is the sixth-largest airline operating in the U.S. Spirit is the seventh. The combined airline would immediately become the fifth-largest air carrier, right behind American, Delta, Southwest, and United.
The complaint argues that Spirit is a significant price-cutting rival of JetBlue and other major carriers and that, if the airline were eliminated from the commercial aviation ecosystem, other airlines would be free to hike fares on consumers. Moreover, the “current trend toward concentration, the lessening of competition, and the tendency to create a monopoly in the airline industry are unmatched and unparalleled,” the suit read.
It goes on to suggest that monopolistic power was the primary goal of the merger. “JetBlue would gain a majority market share on more than a dozen routes where neither it nor Spirit previously dominated, and it would eliminate the price-cutting by Spirit. Therefore, JetBlue made an unsolicited tender offer to purchase Spirit in order to eliminate that competition,” according to the filing.
The complaint states that Spirit is unique in commercial aviation because it’s small enough to survive on smaller ticket prices but large enough to compete against mega-carriers such as United and Southwest.
“Spirit, with its innovative, low-cost service, is an important bulwark against this almost unstoppable trend toward complete concentration and monopoly in the airline industry,” the suit says.
The proposed merger wouldn’t just eliminate another discount option for travelers; it would also remove an essential reason for the four mega-carriers to avoid “abuses” directed toward the flying public. If the Big Four airlines are no longer afraid of losing passengers to Spirit, the result may be skies that are even less friendly than they already are. If the JetBlue / Spirit deal is ultimately allowed to go forward, discount airfares in the U.S. will shrink by 50% overnight.
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Earlier in 2022, the Spirit Board and executives concluded that a merger between Spirit and JetBlue could never be approved by regulators and was, therefore, “illusory.” The Board then rejected an earlier offer by JetBlue. JetBlue offered to “sweeten the deal” by paying the shareholders $400 million if the proposed combination failed. Thus the shareholders could move forward with the JetBlue combination without any risks. The $400 million to shareholders was to quiet the shareholder’s knowledge of the potential illegality of the acquisitions and was little more than “hush money” according to the suit.
All of this poses the question, What’s the end game? Is this all intentional? Greed seems to have airlines so vexed that they can’t see that they could be potentially pricing the consumer out, or could it all just be a ploy to create an ecosystem of, “our way or the highway.’ The entire notion of all of this seems to be rooted in a mindset to force customers to either pay the price or seek other transportation options. In doing so this could stand to hurt us all by driving ridership down thusly causing jobs to potentially be cut.
The airline’s pain is self-inflicted, which is puzzling if we assume management at the carrier is competent.
In September, ground Workers at the airline petitioned to unify with the Machinists Union. The National Mediation Board is reviewing the signatures and is expected to schedule an election within the next few weeks. To the surprise of many veteran Union organizers, JetBlue executives seemed to comply with union election rules, opting not to use many of the stalling tactics typical of anti-union companies, which JetBlue historically has been.
Playing by the rules has so far spared JetBlue from raising the hostility of the Department of Transportation, led by strongly pro-union Pete Buttigieg. Were the airline to face the double threat of challenges from both the Justice Department and Transportation, it would suddenly become hard to see the path forward for any merger.
For his part, Secretary Buttigieg has voiced concerns over the growth of non-union companies within America’s transportation networks. The JetBlue / Spirit merger would create another large airline that isn’t completely unionized.
If the Department of Transportation ultimately decides to oppose the deal, it could spell almost certain doom for JetBlue’s acquisition plans. The DOT has the power to unilaterally deem the arrangement to be not in the public’s interest and nix the merger – without needing to go to court or gain the approval of any other agency.
While JetBlue executives seem to understand the dangers the merger could face from an annoyed DOT, Ground Operations supervisors are struggling to grasp the concept. At virtually every JetBlue location, low-level supervisors have been unlawfully engaging in abusive anti-union tactics. Including unlawfully confiscating union property and threatening Crewmembers – all of which have been reported to Federal Regulators.
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