Written by Guoxin Ding
The American airline industry is dominated by four big airlines: Delta, American, United, and Southwest. With the four collectively possessing a majority of the industry’s market share, one would expect authorities to support efforts to regulate that power. But when JetBlue proposed to merge with Spirit—for the sake of consumer welfare—the Department of Justice stepped in and decided to block the merger. The DOJ’s decision to block this merger reflects a narrow and outdated view of antitrust—one that ignores the reality of competition in the airline industry and even supports the monopoly power it purports to fight.
First, it is important to talk about the market. By the DOJ’s definition, the relevant market is the low-cost carrier market—vulnerable to collusion—by specifically mentioning and making relevant Spirit’s Ultra Low-Cost Carriers model. Ultra Low-Cost Carriers are airlines that only offer point-to-point routes and charge extra for all baggage, meals, and seat selection, which are all included in the tickets’ price in normal airline companies. However, the DOJ limiting the definition of a market to the low-cost carrier market is a mis definition. Consumers have freedom to choose between a range of airlines, which includes ones with full-service models like Delta, hybrid models like JetBlue, and basic models – like Spirit. This makes sense because when consumers want to purchase airline tickets, they are presented with a menu of options that include every airline, regardless of price model, offering their desired route.. Thus, all airline companies are competing with each other. And in this larger market, the four largest airlines control more than 73 percent of total market share, while smaller players have little market share and limited influence over industry pricing or service standards (Oag, 2024). Therefore, the DOJ defined the market too narrowly and overstated the competitive importance of Spirit in isolation.
Currently, the US airline market is already highly concentrated. The Big Four controlling over 73 percent of the market is worth altering(Oag, 2024). Also, Herfindahl–Hirschman Index, a commonly accepted measure of market concentration can be evidenced (DOJ, 2024). HHI is a common measure of market concentration used in antitrust arguments. The definition classifies a market as a highly concentrated market when the HHI value is above 2500 and as a moderately concentrated market when the HHI value is between 1500 to 2500(DOJ, 2024). The US airline market’s HHI is over 2000 under calculation. Even though this is just moderately concentrated, many individual city-pair routes exhibit much higher concentration levels. Under previous cases of merger of American and US Airway, for example, “In more than 1,000 of the city pair markets in which American and US Airways currently compete head-to-head, the post-merger HHI would exceed 2,500 points and the merger would increase the HHI by more than 200 points. For example, on the Charlotte-Dallas city pair, the post-merger HHI will increase by 4,648 to 9,319 (out of 10,000)”(Complaint : U.S. and Plaintiff States v. US Airways Group, 2013). And this merger of US Airway and American still succeed. Moreover, past mergers between the Big Four airlines, such as Delta with Northwest and United with Continental, have been approved with the reason that they would improve operational efficiency and bring more benefits to customers.
However, with the industry even more concentrated than ever, the DOJ has drawn a line in the sand on a relatively modest merger between two middle-sized airlines, which is inconsistent with previous decisions. Jetblue and Spirit only take less than 10 percent of the market share in total(Capitalist, 2024). If the previous mergers between larger airlines were permitted with the reason of competitive benefits, it seems paradoxical to block a deal that would support a middle-sized competitor and improve market dynamic. Also, it is worth mentioning that even the merger of JetBlue and Spirit still only controls a fraction of total capacity.
The merger should be permitted even just for the consumer’s welfare. Someone argued that eliminating Spirit would eliminate the lowest price option from the market. But this is not true. A stronger JetBlue by this merger, supported by Spirit’s market share, would be able to put pricing pressure on the Big Four. With greater economic scale, the combined airline could offer competitive prices while improving service quality, which is an area where Spirit has long struggled.
An important operational advantage of the proposed merger is thatSpirit and JetBlue use the same model of aircraft. The same model will allow the airlines to achieve immediate efficiency through standardized maintenance and crew training. In an industry with high fixed costs and low profit margins, such synergies are crucial. By being able to easily incorporate/ merge fleets, the combined airline can reduce operating costs per seat, ultimately allowing it to offer more competitive fares and expand into new areas that are not covered.
Finally, consider who are the true beneficiaries of the blockage of this merger: The Big Four airlines have very little incentive to welcome the creation of a potentially stronger airline that would capture significantly more market power.. Blocking the merger preserves their dominant position in the overall market. By keeping potential challengers fragmented and financially constrained, these dominant airlines can avoid major disruptions to their pricing-making power. Even though the DOJ’s intention is to protect consumers, it inadvertently serves the interests of the dominant airlines. Blocking the merger has continued to lock travelers into a market where the Big Four control prices, routes and service standards for the vast majority of flights.
In today’s highly concentrated airline industry, the real threat to consumers is not two mid-sized companies merging, but that they remain too small to matter. The decision of the Department of Justice to block the JetBlue-Spirit merger looks principled on paper, but in practice it could enable the continuation of higher prices and fewer choices for years to come. By defining the type of market too narrowly and taking a static view of antitrust policy, regulators miss the opportunity to foster dynamic competition and improve consumers’ long-term interests. This became painfully evident when, shortly after the merger ended, “Spirit filed for bankruptcy protection in November. The biggest U.S. budget airline, Spirit, filed a Chapter 11 bankruptcy petition after working out terms with bondholders” (Chapman, 2025). A broader, more realistic view of the airline market suggests that allowing middle-sized competitors to scale up and challenge industry giants is the path to real consumer welfare and a healthier, more competitive industry.
References
Capitalist, V. (n.d.). The 10 largest U.S. airlines by market share. Voronoi. https://www.voronoiapp.com/transportation/The-10-Largest-US-Airlines-by-Market-Share-4234
Chapman, M. (2025, January 29). Frontier makes another bid for spirit as Budget Airlines Struggle. PBS. https://www.pbs.org/newshour/nation/frontier-makes-another-bid-for-spirit-as-budget-airlines-struggle
Complaint : U.S. and Plaintiff States v. US Airways Group, … (n.d.-a). https://www.justice.gov/atr/case-document/file/514531/dl
Herfindahl-Hirschman Index. Antitrust Division. (2024, January 17). https://www.justice.gov/atr/herfindahl-hirschman-index
Justice Department statements on jetblue terminating acquisition of Spirit Airlines. Office of Public Affairs | Justice Department Statements on JetBlue Terminating Acquisition of Spirit Airlines | United States Department of Justice. (2025, February 6). https://www.justice.gov/archives/opa/pr/justice-department-statements-jetblue-terminating-acquisition-spirit-airlines
Mike Blake (2024). FILE PHOTO: A Spirit commercial airliner prepares to land at San Diego International Airport in San Diego, California, U.S. REUTERS. https://www.pbs.org/newshour/nation/frontier-makes-another-bid-for-spirit-as-budget-airlines-struggle
Oag. (2024, December 17). The Biggest Airlines in the US: OAG. oag_black. https://www.oag.com/blog/biggest-airlines-in-the-us