Were you planning on a last-minute trip to Orlando to visit Gov. Ron DeSantis’s favorite amusement park? “Prices are currently high for your search,” warns Google Flights. Well, yes they are.
And yes, fares have been high throughout our last two years of “revenge travel” mode. Packed jets, ill-tempered passengers, bad airline management and weather roulette contributed to some miserable travel conditions last year, when more than 180,000 flights were canceled, according to Department of Transportation data. While the Federal Aviation Administration is corralling tantrum throwing grown-ups, there’s not much the agency can do about climate change-induced weather events.
The industry is also struggling with staffing shortages that have contributed to domestic airline capacity, relative to the economy, remaining below prepandemic levels. This summer, when our overheating climate starts spinning thunderstorms and hurricanes around the country, we could be back to business as miserable.
Against this backdrop of diminishing expectations, JetBlue Airways stood out. The carrier’s first flight took off in 2000 from busy, brusque Kennedy Airport and actually delivered on the promise of a better in-flight experience — bigger coach seats, more palatable food, free satellite television and pricing that got competitors’ attention. JetBlue’s history as a lower-priced disrupter is so well known it’s called “the JetBlue Effect.” The mere threat of JetBlue sniffing new turf is enough to keep the major players in check.
But now JetBlue wants to be a major player, too. It formed the Northeast Alliance with American Airlines in 2021 and, a year later, announced its planned acquisition of ultra low-cost carrier Spirit Airlines. At a time when four airlines and their tightly coupled networks control 80 percent of the domestic traffic, the U.S. government is fighting both deals. Last month, a federal judge ordered JetBlue and American to disentangle the Northeast Alliance. American said it would appeal.
As a journalist who has covered big mergers and airline operations, I’m taking the government’s side in this fight. If JetBlue is allowed to grow as big as it wants, market forces figure to make the JetBlue Effect evaporate like a vapor trail from one of its jets.
In other parts of the travel and hospitality industry, innovation is a driving force. Hyatt Hotels, for instance, just started a concept called Hyatt Studios, for extended-stay guests, that is the latest of the more than two dozen brands in the company’s portfolio. Innovation in airlines, however, is rarer than reward seats during the holiday season. While most goods and services improve over decades, air travel has defied progress — with the very important exception of safety. Innovative airline start-ups are relatively rare. One of the most recent is Breeze Airways, founded by David Neeleman — who also founded JetBlue.
Why don’t airlines innovate? Part of the answer is that they are in a capital-intense business and are largely driven by chief financial officers, while hotel management companies are asset-light and are driven by customer service managers. The former asks: How much more money can I squeeze out of this very expensive piece of equipment? The latter asks: How can I improve the customer experience and get paid for it? Which is why the experience of arriving at your hotel is so much better than the experience of flying to your destination.
The operating structure of the industry has also made innovation difficult, particularly post-pandemic. When JetBlue started, it attracted thousands of résumés from pilots. Today, the carriers are short thousands of pilots and other professionals. Likewise, there were takeoff and landing slots available at J.F.K. in 2000. Today, the four major carriers control most of these precious slots in major airports and aren’t keen to surrender them. Want new jets? The production wait can be years long.
Nor is the industry vulnerable to outsiders. Transportation disrupters such as Uber and Lime made a strategy out of flouting local regulations and asking for permission later. That’s not an option in air travel: You can’t show up at LaGuardia with a jet and declare yourself open for business.
Since the arrival of ultra low-cost carriers like Spirit, innovation has come mostly in the form of pricing. By unbundling each part of the journey and then tacking on fees — for an assigned seat, for stowing your luggage, for the overhead bin, for getting a printed ticket, for early boarding — average airfares have fallen. That has helped make it possible for many more people to share in the pain of flying.
Logically, as passengers, we’d want more of what JetBlue brought to the business. Its chief executive, Robin Hayes, has promised as much, arguing that a JetBlue-Spirit combination equals more comfort and better services, value priced. “This is the anti-merger merger,” he said in a meeting with Times Opinion in March. He maintains that the combined carriers, which represent about 9 percent of the domestic market, will be able to form a more muscular network that could better take on Delta, Southwest, United and its likely soon-to-be-former partner American.
The Department of Justice is positing that a post-merger JetBlue can’t be the same innovative company it claims it will be. JetBlue can’t imagine not being that same company. But when companies scale, or start making big acquisitions, they can’t necessarily bring their cultures with them, whatever they want to believe. We once thought Facebook, Amazon, Apple, Netflix and Google were cool. Then they became FAANG, an acronym that connotes Big Tech.
The more prosaic view, though, is that JetBlue is buying assets to bulk up. Spirit has roughly 190 Airbus A320 family jets and, just as important, the pilots to fly them. That will allow JetBlue to grow faster than it could organically, if at a high cost. Spirit will most likely disappear in a couple of years, which a cynic might note is not necessarily a bad thing, given its on-time record.
A bigger JetBlue figures to have less reason to innovate because it will have greater pressure to protect its newly expanded turf. Airline mergers inevitably create fortress hubs — United’s combination with Continental erected one in Newark. And JetBlue’s Northeast Alliance with American has already congealed into fortress hubs at J.F.K., LaGuardia and Boston Logan, the Justice Department charged. Fortress hubs result in higher fares. Once in a position of market power, why would JetBlue, or any company, charge less than it can get people to pay?
Wall Street is forever urging capacity discipline to protect profitability. Consider, too, that JetBlue took on debt to finance the $3.38 billion all-cash purchase of Spirit. Which is to say that JetBlue will face considerable obstaclesto remain true blue to its disruptive culture.
Given the industry’s past success in mergers, JetBlue’s chances of capturing Spirit are still good. But a bigger JetBlue would make the carrier a bigger barrier for the creation of a future JetBlue-like airline. That would be unfortunate.
In the postwar jet age era, industry pioneers such as Pan Am’s Juan Trippe, who introduced both the 707 and the 747 into service, knew that the sky was the limit. In the current era, Mr. Trippe might have discovered that the sky is very limited. The JetBlue-Spirit merger would only make it more so.
Bill Saporito is an editor at large at Inc.
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