JetBlue Airways reached an agreement to acquire Spirit Airlines. But the acquisition has not yet been cleared for launch. Consumers and regulators have reason to worry that this merger could mean higher airfares for everyone. And some budget travel experts are already voicing their concerns. Read on to find out what the potential merger could mean for you travel budget.
Reserve. Why does JetBlue want to buy Spirit?
Right now, domestic air travel is dominated by the “Big Four” airlines: Delta, American, United and Southwest. A JetBlue-Spirit merger would create the fifth largest airline in the country. And it would allow JetBlue to compete with larger carriers by acquiring additional aircraft and flight schedules. JetBlue says its goal is to keep fares low, but some industry professionals warn the merger could actually do the opposite.
Could fewer airlines mean higher fares?
One reason industry professionals — not to mention regulators — are wary of the merger is because it could reduce competition. One less airline in an already consolidated market could spell trouble (read: higher prices) for consumers (hello, budget travelers).
Scott Keyes, founder of the travel site Scott’s Cheap Flights, is among critics of the proposed merger because of the impact it could have on flight prices. “Spirit’s low fares cause Delta, United, American and all the other airlines to offer lower fares to compete,” Keyes tells Skimm Money. If Spirit’s super-cheap flights don’t lower prices, competing airlines may raise their fares.
Travel has become increasingly accessible in recent decades. Because more low-cost carriers have entered the market and lowered prices. Doing away with the Spirit is likely to bring rewards. But JetBlue can model its business with Spirit under its wing (sorry) in a way that benefits travelers.
Tell me more. What is the positive potential?
If you’ve flown with Spirit Airlines or other budget carriers like Frontier, you probably know you get what you pay for. You’re not expecting an in-flight movie on your $30 flight to Vegas. JetBlue thinks it can improve that experience by bringing some of its amenities (hello, legroom) to Spirit planes. But of course, that might defeat the purpose of a budget airline if passengers are expected to pay for those upgrades.
Keyes says the business model of Spirit and similar airlines is what has made travel more accessible and low-cost carriers competitive with industry leaders. “The number of people who can afford to fly has increased dramatically over a 20-30 year period,” Keyes explains. “But that doesn’t necessarily mean they’re able to afford business or first class.” And as passengers flock to cheaper fares, budget airlines are taking market share from the Big Four.
Major airlines like Delta and United make most of their money on business and luxury travel. Budget carriers, on the other hand, make a profit by skipping the bells and whistles and focusing on the essentials: simply transporting people. “Budget airlines really focus on the leisure traveler and what they want,” Keyes says. “And when you look at the survey data, you look at the booking behavior, what they want, far more than any other factor, is just the cheapest fare.”
So… should I book plane tickets?
Certainly not. Because if the merger goes through, it will likely be several years before you’re able to board a BlueSpirit (working title) aircraft. And Keyes thinks it’s possible that JetBlue, with the right priorities, will be able to expand its operations and keep prices low.
Psst…if you’re looking to save on airfare, opening a travel credit card can help you start racking up miles.
The best result of a JetBlue-Spirit merger for travelers would be better amenities on still affordable flights. But if the new Spirit abandons those ultra-low fares, other airlines are likely to raise prices as well.