JetBlue once planned to buy Alaska Airlines, court testimony reveals
New details about JetBlue and Spirit Airlines continue to emerge as the airlines face off with the Department of Justice in antitrust court.
The latest revelation: JetBlue has been interested in buying and merging with another airline for years and once saw Alaska Airlines as its ultimate objective.
JetBlue had considered merger opportunities with several other smaller airlines in the 2010s, JetBlue CEO Robin Hayes testified in the U.S. District Court for the District of Massachusetts on Monday, looking to turbocharge its growth in order to compete with the four largest domestic airlines that dominate 80% of the U.S. market — American Airlines, Delta Air Lines, United Airlines and Southwest Airlines.
In 2015, JetBlue pursued a merger with Virgin America shortly after the younger airline's initial public offering but was famously outmaneuvered by a fiercely competitive Alaska Airlines following a bidding war — Alaska offered $57 a share, 47% over the closing price the day of the bid. The deal was finalized with Alaska paying $2.6 billion.
JetBlue nevertheless remained interested in acquiring another airline, Hayes testified.
In 2017, JetBlue began exploring options again, focusing on two potential airlines, one of which was Spirit, according to a document shown in court — the name of the other airline was redacted.
Both during the Virgin America bidding and the opportunity assessment in 2017, the primary motivation was to grow fast and build more of a national presence, Hayes said. A presentation made to JetBlue's board in 2017, shown in court on Monday, noted that "each option provides a unique strategic opportunity for JetBlue and builds a stronger platform to compete against the Big 4."
The plan was tabled because the price was expected to be too high, Hayes testified. He said he expected that any bid for Spirit would require a high premium like the one that Alaska had paid for Virgin, which JetBlue did not see as affordable.
JetBlue revisited its interest in Spirit in late 2019, launching a new program — codenamed "Project Exchange" — to consider a merger between the two. It saw the airlines' fleet commonalities and similar order books as a major opportunity, listing the strategic rationale for the project as the option to "unleash a sustainable challenger brand to the legacy airlines."
JetBlue's board voted in favor of pursuing an acquisition this time, and at its February 2020 meeting, it authorized Hayes to approach Spirit CEO Ted Christie. However, before he could weigh in, the coronavirus pandemic began affecting the airlines, and the project was put on hold until 2022, when Frontier and Spirit announced their intention to merge.
At some point during the assessment of a merger with Spirit, a slide in a presentation made to the board noted that "Spirit is the next natural step in our longer-term goal to pursue Alaska." The undated slide was shown in court on Monday.
JetBlue never approached Alaska, Hayes testified, and does not plan to. Hayes said that he does not anticipate any further merger activity assuming the deal with Spirit is allowed to proceed, seeing additional acquisitions as unlikely to achieve regulatory approval.
Spirit was similarly interested in merger opportunities before the pandemic, Christie testified last week, seeing it as the best way to grow large enough to compete with the major airlines.
During questioning by the defense, Hayes discussed the concept of divestitures, noting that the airline had proactively offered several remedies meant to alleviate anticipated regulatory concerns, including forfeiting Spirit's slots, landing rights and gates in Boston, New York and Fort Lauderdale.
Judge William G. Young, who is trying the case, appeared interested in several of the points of divestitures, asking Hayes whether those slots and gates would be useful if offered to other ultra-low-cost airlines given the current aircraft supply chain issues. Hayes characterized the assets as a "generational opportunity."
Also on Monday, the defense raised several comments that the Department of Justice made about JetBlue during last year's Northeast Alliance trial. Among those, the government described JetBlue as "unique among LCCs" and said that "high quality of service allowed it to compete effectively against legacy airlines in ways other LCCs/ULCCs could not."
The DOJ additionally noted during last year's trial that "for more than 2 decades, JetBlue served as legacy airlines' foil in the northeastern U.S." and said that "in total, competition between JetBlue and the legacy airlines has saved travelers billions of dollars."
TPG is reporting from the trial on-site at the U.S. District Court in Boston, so be sure to check back for the latest.
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There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
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- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
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- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.