BREAKINGVIEWS-Yawing US airline betrays antitrust rudder limits

By Jonathan Guilford

NEW YORK, Aug 12 (Reuters Breakingviews) - Like airplane pilots, trustbusters have important gauges to check, including whether a seller can achieve sufficient altitude. Discount carrier Spirit Aviation FLYY.A warned of “substantial doubt” about its survival mere months after emerging from a bankruptcy caused partly by competition authorities nixing its deal with rival JetBlue Airways JBLU.O. Although intervention is sometimes warranted, it’s easy to misjudge the tailwinds.

Spirit has charted a bumpy course. Its agreed $3.8 billion sale to JetBlue in 2024 promised high reward for higher risk than being acquired by Frontier ULCC.O. JetBlue’s plan to retrofit Spirit’s shabby planes raised reasonable concerns about shrinking the budget market. Shareholders and creditors have alternatively balked at combining with Frontier.

Another crash can be prevented. The judge that ruled in favor of grounding the JetBlue merger also left the door open for a different pairing. Combining with Frontier still makes sense. Without a partner, Spirit will struggle to succeed in a domestic market overwhelmingly dominated by American Airlines AAL.O, Delta Air Lines DAL.N, Southwest Airlines LUV.N and United Airlines UAL.O. Throw in a trade war and inflation worries, and the company’s fate may be sealed.

Success stories typically start with a little more runway. Former Federal Trade Commission Chief Lina Khan, for example, has touted the blockbuster initial public offering of design software developer Figma, which is now worth more than $40 billion, a couple weeks ago. Her Justice Department counterparts helped derail its agreed 2023 sale to larger rival Adobe for $20 billion.

Wireless carrier T-Mobile TMUS.O makes another good case for deal traffic control. Regulators blocked its $39 billion sale to AT&T T.N in 2011. After being forced to go it alone, T-Mobile now tallies more subscribers than its former suitor and a $280 billion market value.

The main difference is the safety systems. In red-hot software, venture capitalists are more likely to prop up even wildly unprofitable startups, and Figma’s momentum was accelerating. As part of its generous breakup fee, T-Mobile secured wireless spectrum from AT&T, the lifeblood of its business.

Other decisions are harder to understand. Self-propelling vacuum maker iRobot IRBT.O competes against copycats and the company’s decline was well-flagged, but regulators blocked its $1.4 billion sale to Amazon.com AMZN.O last year anyway. It’s now worth about $100 million. In Spirit’s case, despite the plausible landing slot with Frontier, it has been impossible to align the various stakeholders. There’s only so far trustbusters can fly the plane.

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CONTEXT NEWS

Spirit Aviation, the reorganized successor to ultra-budget carrier Spirit Airlines, said on August 11 that there is “substantial doubt as to the company’s ability to continue as a going concern.” It cited higher domestic flight capacity and weaker demand for leisure travel.

A judge blocked JetBlue Airways from acquiring Spirit for $3.8 billion in January 2024, after the suitor had prevailed against rival Frontier in a bidding war. Frontier subsequently offered to buy Spirit, but was rebuffed.