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**JULY 29, 2022**

Kuttner on TAP

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**Another Airline Merger That Would Worsen Inflation**

The JetBlue buyout of low-cost Spirit Airlines faces certain action from
Biden's reinvigorated antitrust officials.

JetBlue has made a $7.6 billion deal to buy low-price carrier Spirit
Airlines. There is only one purpose to the deal-to raise fares and
costs to consumers. JetBlue beat out a proposed merger between Spirit
and another low-cost airline, Frontier. That would also have reduced
head-to-head competition, but not as much.

As the Biden administration has increased antitrust enforcement via a
revived Federal Trade Commission under Lina Khan and a newly vigorous
Justice Department Antitrust Division led by Jonathan Kanter, government
investigation and litigation to block this deal appears inevitable. The
airline industry today has just four large airlines, Delta, American,
United, and Southwest, the result of past mergers that were permitted by
the indulgence of previous antitrust authorities, under Republicans and
Democrats alike.

Together, those dominant carriers have 80 percent market share. There
are ever fewer routes with competing airlines, and even on those that do
have more than one carrier, the fares bear an uncanny similarity to one
another.

JetBlue, which does offer bargain fares on some routes, is a wannabe
fifth national major player. If the merger with Spirit goes through, it
would have about 9 percent market share. "Spirit is going to disappear,
and with it, its low cost structure," said William McGee of the American
Economic Liberties Project. "Once Spirit is absorbed (into JetBlue),
there is no question that fares are going to go up."

The sheer gall of these airline executives is astonishing. JetBlue has
already been sued by the Antitrust Division for its so-called "Northeast
Alliance," a so-called code-sharing deal with American that allows each
carrier to sell seats on the other's flights. In announcing that suit

last September, Attorney General Merrick Garland said, "American
Airlines' 'alliance' with JetBlue is, in fact, an unprecedented
maneuver to further consolidate the industry. It would result in higher
fares, fewer choices, and lower quality service if allowed to continue."
Strong words from the usually circumspect AG.

The Justice Department's complaint against that deal reflects a great
deal of research, and goes into details that foreshadow a newfound
concern about oligopoly pricing power in key industries. It's about
time. If we care about inflation, industry concentration is one good
place to fight it.

~ ROBERT KUTTNER

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