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In an environment of ever-increasing inflation and high costs of living, Spirit Airlines’ announced bankruptcy was but another economic blow to working-class Americans.
No-frills airlines historically offered some of the cheapest fares in the market, making air travel accessible to millions who probably otherwise couldn’t afford it. But now one of the cheapest ones is gone for good. The company ceased operating this month, and, in some markets, fares are already up 218 percent. These shockingly high price hikes have been sadly coined, “the Spirit Effect.”
Yes, it’s true that the Trump administration’s unjustifiable war in Iran and the high fuel prices that it has generated contributed significantly to Spirit Airlines’ demise. But an honest evaluation of Spirit’s collapse must also include an analysis of modern-day antitrust enforcement—and whether, in this case, those who sued to block the merger (the Department of Justice, the District of Columbia, the Commonwealth of Massachusetts, and the State of New York) fully accounted for the real-world risks facing the airline industry and the consumers who depended on Spirit’s low-cost model. Neera Tanden, President Joe Biden’s Director of the Domestic Policy Council and CEO of the Center for American Progress, opened the debate with a thought-provoking post on X. Tanden noted:
Given the news today that Spirit Airlines is shuttering and thousands of people are losing their jobs, I think we should honestly assess whether the Garland DOJ stopping the JetBlue merger with Spirit Airlines was the right call. Perhaps it was but any analysis must consider as part of the equation the loss to so many families [t]o decide.
To rephrase Tanden’s point slightly differently: if the consequence of blocking JetBlue–Spirit is Spirit’s failure and thousands of job losses, we must ask whether that decision was the right call. In other words, did overzealous enforcement efforts over the proposed JetBlue-Spirit Merger even consider the practical effects for Spirit’s consumers and workers?
The great Justice Thurgood Marshall described antitrust laws as “the Magna Carta of free enterprise.” Antitrust law is not meant to punish companies simply for becoming large or successful. Its purpose is to preserve competition while protecting consumers from higher prices, fewer choices, and reduced innovation. That goal apparently wasn’t even remotely followed in JetBlue- Spirit context.
When President Reagan took office, merger activity exploded, encouraged in part by 1981 tax law changes and the increased use of junk-bond financing. By the 2000s, mega-mergers had become a common part of the economic lexicon. Not only did the number of deals explode, but so did their size. Deals exceeding $1 billion rapidly accelerated from 20 in the early 1990s to 208 in 2000. By 2021, global mergers and acquisitions reached an unprecedented $5.8 trillion.
Justice Louis Brandeis famously observed: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” Seeking to rekindle Brandeis’ warning into policy in an era of megamergers with an influx of appointments of micromanagers, the Neo-Brandeisians gained influence, culminating in President Biden’sappointment of NYU Scholar Lina Khan to head the Federal Trade Commission (FTC). Khan updated merger guidelines to reflect modern markets and ended the era of rubber-stamp approval of corporate mergers.
That broader skepticism toward consolidation was not entirely without merit. In some industries, stronger enforcement may well have been necessary, such as against the major tech companies. But Spirit Airlines was not a dominant corporation wielding monopoly power. It was a financially vulnerable discount carrier whose business model consistently put downward pressure on ticket prices.