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JetBlue Expects U.S. Move to Block Merger With Spirit

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JetBlue said it saw a “high likelihood” of an antitrust suit by the Justice Department this week, but declared that the deal would foster competition.JetBlue Airways said Monday that it saw a “high likelihood” that the Justice Department would sue the company this week over its planned acquisition of Spirit Airlines. The $3.8 billion deal could create a new challenger to the nation’s four dominant carriers, but would add to industry consolidation.JetBlue said that it had long prepared for such a lawsuit and that its timeline for closing the deal was unchanged, provided it overcomes the expected challenge in court.“We believe there is a high likelihood of a complaint from D.O.J. this week, and we have always accounted for that in our timeline to close the transaction in the first half of 2024,” the company said.Critics of the deal say removing Spirit from the market would limit competition and further consolidate an already concentrated industry. While JetBlue is known for affordable fares, Spirit offers even lower prices, charging extra for everything from printing boarding passes at airport kiosks to selecting seats in advance. After the deal, JetBlue would reconfigure Spirit’s densely packed planes, removing seats, increasing legroom and adjusting the economics of each flight.According to two people familiar with the Justice Department’s plans, a government lawsuit will contend that after removing seats from Spirit planes, the combined airline would not be able to increase revenue per passenger without raising prices.Buying Spirit would allow JetBlue to accelerate its plans for growth. Today, JetBlue controls more than 5 percent of the U.S. airline market. After the acquisition, it would have a 10 percent share, making it the fifth-largest airline in the country. United Airlines, the fourth-largest carrier, has a 15 percent market share. Southwest Airlines, Delta Air Lines and American Airlines each have a more than 17 percent share.“JetBlue’s combination with Spirit allows it to create a compelling national challenger to these dominant airlines,” JetBlue said in a news release on Monday describing some of its arguments in favor of the deal.The acquisition would benefit consumers and disrupt the industry, it said, allowing JetBlue to bring low fares to new markets and forcing those large airlines to match its lower prices. JetBlue also said it had committed to giving up some of Spirit’s holdings in markets such as Boston, New York and Fort Lauderdale, Fla., where the combined airline would have an outsize presence.But the two people familiar with the Justice Department’s plans said its suit would assert that there was no guarantee that other airlines, with different cost structures from Spirit’s, would pick up Spirit slots that JetBlue might offer to shed.In addition to the Justice Department, the Transportation Department could also stand in the way of the deal by blocking the transfer of operating certificates, opponents of the sale have argued.After the expectation of a federal move to block the acquisition was reported on Monday, Spirit shares fell more than 8 percent. JetBlue shares were up about 1 percent.Unions representing workers at both airlines are divided on whether the merger should proceed. Last month, the Association of Flight Attendants-C.W.A., which represents 5,600 flight attendants at Spirit, wrote to Attorney General Merrick B. Garland and Transportation Secretary Pete Buttigieg to express support for the deal.“The JetBlue-Spirit merger will help to correct conditions in the industry with demonstrable improvements and protections for workers along with greater competition that benefits workers and consumers alike,” the union’s president, Sara Nelson, said in the letter. “This is the anti-merger, merger.”In a separate letter, the head of the Transport Workers Union, which represents 6,800 JetBlue flight attendants, asked Mr. Garland and Mr. Buttigieg to prevent the acquisition, arguing that it would violate antitrust laws and undermine competition and workers.In a letter in September, Senator Elizabeth Warren, a Massachusetts Democrat, asked Mr. Buttigieg to use his department’s “historically underutilized” authorities to intervene.JetBlue is also awaiting the outcome of a Justice Department antitrust lawsuit over the airline’s partnership with American in Boston and New York. A federal judge in Boston is expected to issue a decision in that case imminently.Lauren Hirsch More

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    Fuel Prices Send Airfares Higher, but Travelers Seem Ready to Pay

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    Supplies are not keeping up with demand, and costs may go higher, experts say.A stunning rise in the cost of jet fuel has sent airfares soaring, and industry experts say they are likely to go higher. For now, though, travel-starved consumers seem more than willing to pay up.Jet fuel prices have settled somewhat since Russia’s invasion of Ukraine sent them skyrocketing last month, but the market remains extremely volatile. The problem is particularly severe in New York, where the cost of the fuel rose about fourfold to just over $7.50 a gallon before dipping back to $5.30 in recent days.Supply is broadly constrained and prices have spiked across the country. The Energy Department this week said that the inventory level for East Coast jet fuel stood at 6.5 million barrels, the lowest since the agency began keeping track in 1990.“Jet fuel has made the most parabolic move I’ve ever seen for any transportation fuel,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “It’s just insane.”The surge in prices has implications not only for airfares but also for the already high costs of global shipping. On Wednesday, for example, Amazon announced plans to impose its first “fuel and inflation surcharge” for sellers whose goods it stores and delivers.Airlines have been able to pass on some of their added fuel expense to consumers, many of whom are more than eager to travel after being denied the opportunity for two years.At the start of this year, the average cost of a round-trip domestic flight was $235, according to Hopper, an airfare-tracking app. Since then, ticket prices have risen 40 percent, to $330. Adit Damodaran, an economist at Hopper, which tracks prices for flights and hotels, said the company expects another 10 percent rise, to $360, by the end of May, before prices drop again in the summer.“Not only are the current prices that travelers are paying extremely high compared to historic price data, but the rate of increase has also been particularly steep since January,” he said.In addition to the rising cost of jet fuel, Mr. Damodaran said, the surge in airfares can also be attributed to typical seasonal patterns and the fact that demand was suppressed at the start of the year as the Omicron coronavirus variant spread.Some airlines have also cut flights in response to persistent staff shortages, creating greater competition and driving up fares for the flights that remain.Carriers typically pass on to consumers as much as 60 percent of a volatile rise in the price of fuel, experts said, a process that usually takes months. This time, however, the industry has been able to pass along costs more quickly, in large part because of high demand and a shift in consumer behavior during the pandemic toward buying tickets closer to the date of travel.“We are successfully recapturing a significant portion of the run-up in fuel,” Ed Bastian, the chief executive of Delta Air Lines, told investment analysts and reporters on a call on Wednesday. “This is occurring almost in real time, given the strong demand environment.”Mr. Bastian said that Delta, the first major carrier to report financial results for the first three months of this year, had seen a strong rebound so far and that it was preparing for a robust spring and summer.Delta paid an average price of $2.79 per gallon of jet fuel in the quarter, up 33 percent from the last quarter of last year. The price included a saving of 7 cents per gallon from the airline’s oil refinery outside Philadelphia. Delta said it expected the price of fuel to rise another 15 to 20 percent over the next three months, to between $3.20 and $3.35 per gallon, a range that includes an approximately 20-cent savings attributable to the refinery.Prices for jet fuel, like gasoline and diesel, generally go up and down with crude oil.In February, American Airlines reported that the price it paid per gallon of jet fuel had risen more than a third over the past year, from $1.48 in 2020 to $2.04 in 2021. At the time, it said that each sustained one-cent rise in the per-gallon price would increase its fuel expense for 2022 by about $40 million. This week, American estimated that it had paid $2.80 to $2.85 per gallon in the first quarter of the year.Rising fuel costs and fares seem to be doing little to dissuade consumers. Mr. Bastian said Wednesday that March was Delta’s best sales month ever, beating a record set in 2019, despite having 10 percent fewer seats available. That comes as fares for domestic flights were up about 20 percent across the board between March 2019 and March 2022, according to an analysis by the Adobe Digital Economy Index, which draws on online sales from six of the top 10 U.S. airlines.Refueling at San Francisco International Airport. Some jet fuel shipments were diverted from the East Coast to the West as California prices began to climb.Justin Sullivan/Getty Images“We’ve all been stuck at home for two years, and I think now that we have the opportunity to get out, there’s going to be a lot of willingness to pay,” said Joe Rohlena, lead airline analyst for Fitch Ratings. “If it remains expensive to travel further out, then you may see that kind of willingness to pay higher ticket prices back off.”The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    Thanksgiving Holiday Travel Will Test Airlines

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    Widespread flight cancellations. Excruciating waits for customer service. Unruly passengers.And that was all before the holiday travel season.Even in normal times, the days around Thanksgiving are a delicate period for the airlines. But this week is the industry’s biggest test since the pandemic began, as millions more Americans — emboldened by vaccinations and reluctant to spend another holiday alone — are expected to take to the skies than during last year’s holidays.A lot is riding on the carriers’ ability to pull it off smoothly.“For many people, this will be the first time they’ve gotten together with family, maybe in a year, year and a half, maybe longer, so it’s very significant,” said Kathleen Bangs, a former commercial pilot who is a spokeswoman for FlightAware, an aviation data provider. “If it goes poorly, that’s when people might rethink travel plans for Christmas. And that’s what the airlines don’t want.”The Transportation Security Administration said it expected to screen about 20 million passengers at airports in the 10 days that began Friday, a figure approaching prepandemic levels. Two million passed through checkpoints on Saturday alone, about twice as many as on the Saturday before last Thanksgiving.Delta Air Lines and United Airlines both said they expected to fly only about 12 percent fewer passengers than they did in 2019. And United said it expected the Sunday after Thanksgiving to be its busiest day since the pandemic began 20 months ago. Many Thanksgiving travelers seem to be going about their travel routines as usual, with some now-familiar pandemic twists.“Airports are busy right now, and everything seems back to normal,” said Naveen Gunendran, 22, a University of Illinois student who was flying on United from Chicago to San Francisco on Saturday to visit relatives. “But we’re all packed together, and we just have to hope everybody is being safe.”The pent-up travel demand has elevated the cost of tickets. Hopper, an app that predicts flight prices, said that the average domestic flight during Thanksgiving week was on track to be about $293 round-trip this year, $48 more than last year — although $42 cheaper than in 2019.While the industry is projecting optimism about easy traveling, the influx of passengers has injected an element of uncertainty into a fragile system still reeling from the pandemic’s devastation. Some airlines have experienced recent troubles that rippled for days — stymying travel plans for thousands of passengers — as the carriers struggled to get pilots and flight attendants in place for delayed and rescheduled flights, a task complicated by thin staffing.“We’ve said numerous times: The pandemic is unprecedented and extremely complex — it was messy going into it, and it’s messy as we fight to emerge from it,” the president and chief operating officer of Southwest Airlines, Mike Van de Ven, said in a lengthy note to customers last month.His apology came after Southwest canceled nearly 2,500 flights over a four-day stretch — nearly 18 percent of its scheduled flights, according to FlightAware — as a brief bout of bad weather and an equally short-lived air traffic control staffing shortage snowballed.Weeks later, American Airlines suffered a similar collapse, canceling more than 2,300 flights in four days — nearly 23 percent of its schedule — after heavy winds slowed operations at Dallas-Fort Worth International Airport, its largest hub.American and Southwest have said they are working to address the problems, offering bonuses to encourage employees to work throughout the holiday period, stepping up hiring and pruning ambitious flight plans.Sara Nelson, president of the Association of Flight Attendants, a union representing roughly 50,000 flight attendants at 17 airlines, gave the carriers good marks for their preparations.“First and foremost, we are getting demand back after the biggest crisis aviation has ever faced,” she said.“I think there has been a lot of good planning,” she added. “And barring a major weather event, I think that the airlines are going to be able to handle the demand.”According to FlightAware, just 0.4 percent of flights were canceled on Sunday, which the T.S.A. said was nearly as busy as the Sunday before Thanksgiving in 2019.Thanksgiving travel will be a major test of whether the airline industry is ready to return to normal operations.DeSean McClinton-Holland for The New York TimesTravelers at La Guardia Airport in New York on Sunday. Some got away earlier than usual because of the flexibility of doing jobs or taking classes remotely.DeSean McClinton-Holland for The New York TimesMajor airlines have just started to report profits again, and only after factoring in billions of dollars of federal aid. While the aid allowed carriers to avoid sweeping layoffs during the pandemic, tens of thousands of employees took generous buyouts or early-retirement packages or volunteered to take extended leaves of absence.That has made ramping back up more difficult, and the pandemic has created new challenges. Flight crews have had to contend with overwork and disruptive and belligerent passengers, leaving them drained and afraid for their safety.Helene Albert, 54, a longtime flight attendant for American Airlines, said she took an 18-month leave by choice that was offered because of the pandemic. When she returned to work on Nov. 1 on domestic routes, she said, she saw a difference in passengers from when she began her leave.“People are hostile,” she said. “They don’t know how to wear masks and they act shocked when I tell them we don’t have alcohol on our flights anymore.”The number of such unruly passengers has fallen since the Federal Aviation Administration cracked down on the behavior earlier this year. But the agency has so far begun investigations into 991 episodes involving passenger misbehavior in 2021, more than in the last seven years combined. In some cases, the disruptions have forced flights to be delayed or even diverted — an additional strain on air traffic.Dallas-Fort Worth International Airport on Saturday.Cooper Neill for The New York TimesLayered on top of the industry’s struggles during the holiday season is the perennial threat of inclement weather. Forecasters have cautioned in recent days that gathering storm systems were threatening to deliver gusty winds and rain that could interfere with flights, but for the most part, the weather is not expected to cause major disruptions.“Overall, the news is pretty good in terms of the weather in general across the country cooperating with travel,” said Jon Porter, the chief meteorologist for AccuWeather. “We’re not dealing with any big storms across the country, and in many places the weather will be quite favorable for travel.”Even so, AAA, the travel services organization, recommended that airline passengers arrive two hours ahead of departure for domestic flights and three hours ahead for international destinations during the Thanksgiving travel wave.Some lawmakers warned that a Monday vaccination deadline for all federal employees could disrupt T.S.A. staffing at airports, resulting in long lines at security checkpoints, but the agency said those concerns were unfounded.The influx of passengers has added uncertainty to a system still reeling from the pandemic. Christopher Lee for The New York TimesMajor airlines have just started to report profits again, and only after factoring in billions of dollars of federal aid.Christopher Lee for The New York Times“The compliance rate is very high, and we do not anticipate any disruptions because of the vaccination requirements,” R. Carter Langston, a T.S.A. spokesman, said in a statement on Friday. With many people able to do their jobs or classes remotely, some travelers left town early, front-running what are typically the busiest travel days before the holiday.TripIt, a travel app that organizes itineraries, said 33 percent of holiday travelers booked Thanksgiving flights for last Friday and Saturday, according to its reservation data. (That number was slightly down from last year, when 35 percent of travelers left on the Friday and Saturday before Thanksgiving, and marginally higher than in 2019, when 30 percent of travelers did so, TripIt said.)Among those taking advantage of the flexibility was Emilia Lam, 18, a student at New York University who traveled home to Houston on Saturday. She is doing her classes this week remotely, she said, and planned her early getaway to get ahead of the crush. “The flights are going to be way more crowded,” she said, as Thursday approaches.Robert Chiarito and Maria Jimenez Moya contributed reporting. More

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    Airlines See a Surge in Domestic Flights, Beating Forecasts

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    U.S. carriers are reaping the rewards as a surge in domestic air travel has exceeded forecasts.The aviation recovery is gaining momentum.A summer travel bonanza is exceeding expectations, helping airlines earn profits again and brightening the outlook for the rest of the year. It’s a welcome relief for a battered industry and a sign that the rebound that began this spring appears to be here to stay.The economic upturn, aggressive cost-cutting and an enormous federal stimulus that paid many salaries have helped to improve the finances of the largest carriers, which took on vast amounts of debt and lost billions of dollars during the pandemic.This month, consumer spending on airlines briefly exceeded 2019 levels on a weekly basis for the first time since the pandemic began, according to Facteus, a research firm that monitors millions of online payments. Ticket prices have rebounded, too: In June, fares were down only 1 percent from the same month in 2019, according to the Adobe Digital Economy Index, which is similarly based on website visits and transactions.And on Sunday, the Transportation Security Administration screened more than 2.2 million travelers at its airport checkpoints, the most in one day since the start of the pandemic.“As people have gotten vaccinated and things have reopened, the demand is just very, very strong — and I think, in general, it’s stronger than people thought it would be,” said Helane Becker, an airline analyst at the investment bank Cowen. “People have money and time, and they’re using it to travel.”A full recovery rests on the return of two pillars of the business, corporate and international travel, but executives said they expected both to improve meaningfully over the coming months. And while the Delta variant of the coronavirus could still threaten the travel rebound, customers are so far undeterred.“We haven’t seen any impact at all on bookings,” Scott Kirby, the chief executive of United Airlines, said this week on a call to discuss quarterly financial results with analysts and reporters. “The most likely outcome is that the recovery in demand continues largely unabated.”His comments aligned with those of executives at American Airlines and Delta Air Lines, who said on similar calls that they had seen no drop in demand because of the variant. Both Delta and United added that a vast majority of employees and regular customers had received coronavirus vaccines, which appear to provide protection against the variant.The rising demand has prompted hiring across the industry. American said Wednesday that it planned to hire 1,350 pilots by the end of next year, a 50 percent increase over previous plans. Last week, the company announced that it planned to hire hundreds of flight attendants and bring back thousands who volunteered for extended leaves during the pandemic.Southwest Airlines said in June that it would increase its minimum wage to $15 an hour to retain and attract workers, while Delta is in the middle of hiring thousands of employees. United last month announced plans to buy 270 new planes in the coming years, the largest airplane order in its history and one that would create thousands of jobs nationwide.Southwest on Thursday reported a profit of $348 million for the quarter that ended in June, its second profitable quarter since the pandemic began. American reported a $19 million profit over the same period, while Delta last week reported a $652 million profit, a pandemic first for each airline. United this week reported a loss, but projected a return to profitability in the third quarter as its business improved faster than forecast.The financial turnaround has been buoyed by an infusion of $54 billion of federal aid to pay employee salaries over the past year and a half. Without those payments, none of the major airlines would have been able to report profits for the quarter that ended in June. The aid precludes the companies from paying dividends through September 2022.Each airline offered a hopeful outlook for the current quarter. American projected that passenger capacity would be down only 15 to 20 percent from the third quarter of 2019, while United projected a 26 percent decline and Delta forecast a 28 to 30 percent drop. Southwest, which differs from the other three large carriers in that it operates few international flights, said it expected capacity to be comparable to the third quarter of 2019.“We are just really excited about the momentum we’re seeing in the numbers,” Doug Parker, American’s chief executive, told analysts after the company delivered its earnings report.The financial results and forecasts for the rest of the summer are the latest sign of strength in a comeback that has been building for months. But the airlines have vast amounts of debt to repay — American, the most indebted carrier, announced a plan on Thursday to pay down $15 billion by the end of 2025 — and the rebound hasn’t been free of setbacks.Passenger volumes are still down nearly 20 percent from prepandemic levels, and airlines suffered widespread delays and cancellations as passengers returned in droves last month, according to data from FlightAware, a flight tracking company. About 17 percent of Delta’s flights were delayed at least 15 minutes in June, along with more than 20 percent for United, more than 30 percent for American and 40 percent for Southwest.Travelers at Miami International Airport last month. Airlines had many delays and cancellations as passengers returned in droves last month.Saul Martinez for The New York Times“While the rapid ramp-up in June travel demand provided stability to our financial position, it has impacted our operations following a prolonged period of depressed demand,” Southwest’s chief executive, Gary Kelly, acknowledged in a statement on Thursday. “Therefore, we are intensely focused on improving our operations as we restore our network to meet demand.”Carriers have also struggled to get workers in place to meet that demand. American suffered shortages of catering and wheelchair operators last month, while it also accelerated pilot training to bring more than 3,000 back from extended leaves. Last week, Ed Bastian, chief executive of Delta, said the airline had struggled to train new or long-sidelined employees.“It takes a few months, and the demand has come back at such a fast clip,” he said. “It’s taken us all a little bit of time to catch our breath. But we’ll be fully back over the next couple of months.”One form of travel, trips to visit friends or family within the United States, has generally recovered to 2019 levels, with Southwest saying such leisure travel exceeded 2019 levels in June.Surveys show that corporate travelers are increasingly eager to get back on the road this fall, when business travel typically picks up. Nearly two-thirds of companies that suspended business travel in the pandemic expect to bring it back over the next one to three months, according to a recent poll from the Global Business Travel Association, an industry association. If other companies follow Apple’s lead in delaying a return to the office, though, the corporate travel recovery could be held back.Delta said it expected domestic business trips to recover to about 60 percent of 2019 levels by September, up from 40 percent in June. Those figures roughly align with estimates from United.“The demand is recovering even faster than we had hoped domestically,” Mr. Kirby of United said on Wednesday.International travel has slowly started to recover, too, as more countries, particularly in Europe, open up to American travelers who can provide proof of vaccination or a negative coronavirus test. But airlines are lobbying the Biden administration to loosen restrictions in kind, which, they say, will allow the recovery to accelerate.“I think the surge is coming, and just as we’ve seen it on the consumer side, we’re getting ready for it on the business side,” Mr. Bastian of Delta said last week. “Once you open businesses, offices, and you get international markets opened, I think it’s going to be a very good run over the next 12 to 24 months.” More