Hated by some, loved by others, Spirit was a pillar of the airline industry. In May 2026, it shut down overnight. The announcement came as a shock to over 20,000 stranded Spirit passengers and to its 17,000 employees.
For many, Spirit’s shutdown seemed sudden and unprovoked. However, the airline had been plagued by financial issues for several years, and its failure to recover from those issues was far from inevitable. In 2022, a merger attempt could have saved the low cost carrier, whose “Spirit Effect” reduced air fares by up to 30% on routes it served by competing with more expensive airlines. The Biden Department of Justice killed the deal, and killed Spirit with it. However virtuous the DOJ’s intentions may have been, its efforts to prevent Spirit’s merger ultimately proved detrimental for airline travelers. The recent demise of Spirit should serve as a cautionary tale for the government’s future efforts to regulate industries through antitrust lawsuits.
Down But Not Out: Spirit’s Economic Difficulties and an Almost Merger
Spirit, once a profitable airline, started facing financial difficulties in 2020, when the COVID-19 pandemic decimated demand for air travel. According to the International Air Transport Association, passengers traveled 65.9% less kilometers by plane that year compared to 2019. As a result, Spirit’s net profit decreased from $335 million in 2019 to a $429 million loss in 2020, despite receiving $754 million from the federal government that year to help cover employee salaries.
The period following the pandemic also saw an increase in operational costs for airlines. A pilot shortage and inflation both made it more difficult for Spirit to turn a profit. In 2022, an increase in fuel prices as a result of the Russian invasion of Ukraine further exacerbated Spirit’s financial issues. These factors contributed to Spirit’s net loss of $554 million that year. The airline failed to make a profit in the following years as well.
After multiple consecutive years of losses totalling $3.1 billion, the carrier first filed for Chapter 11 bankruptcy in November 2024. Spirit filed for bankruptcy again in August 2025, unable to reverse its financial trajectory. Finally, the recent increase in fuel prices due to tensions in the Middle East dealt the final blow to Spirit in May 2026.
Despite the airline’s bleak financial picture, Spirit’s downfall was very likely reversible. In 2022, Spirit was given a lifeline. It initially agreed with Frontier Airlines, another ultra low-cost carrier (ULCC), to merge in February 2022 in a $6.6 billion deal. However, a few months later, low-cost carrier JetBlue outbid Frontier — offering $33.50 per share as opposed to the latter’s $24.30. Spirit soon announced shareholders’ decision to merge with JetBlue, forming what would have been the fifth-largest airline in the United States.
Regardless of which deal was approved by Spirit shareholders, the issue remains the same. Spirit was struggling, and a merger could have allowed the airline to better rival the four dominant domestic carriers: American, Delta, Southwest, and United. These four players together control more than 80% of the domestic flight market in the U.S. In comparison, the JetBlue-Spirit merged airline would have had a market share of 10%. This would represent a proportion significantly short of United Airlines’ 14% share, which placed it as the fourth largest domestic airline in the United States at the time, and especially behind American Airlines’ 18% share, which made it the largest.
Spirit’s Demise at the Hands of the DOJ
In March 2023, the Biden Department of Justice sued to prevent the merger on antitrust grounds, arguing that it would reduce competition and increase fares for travelers. The District of Columbia, Massachusetts, and New York State joined the federal government’s lawsuit.
In January 2024, Senior District Judge William G. Young sided with the DOJ and blocked the merger permanently, arguing that it violated Section 7 of the Clayton Act, which prohibits
any merger that has a reasonable chance of reducing competition or creating a monopoly in any part of a market. In its complaint, the DOJ argued that the merger would have increased prices for consumers, as Spirit lowered industry-wide fares up to 30%, more than JetBlue since Spirit fares are typically lower than JetBlue fares. The DOJ contended that JetBlue planned to reduce the number of seats on Spirit aircraft to offer a more premium experience to passengers, which would bring Spirit fares closer to the larger airlines’ fares and thus reduce its ability to lower the fares of competing airlines. In his ruling, Judge Young was receptive to this argument.
The main issue discussed by the DOJ related to airports where JetBlue and Spirit both had a presence, since they would no longer compete at those airports after merging, all while representing a more substantial portion of the airlines present at those airports and thus consolidating control at the potential expense of customers.
However, not only do these routes represent only 11% of the airlines’ total flights, but JetBlue and Spirit actually agreed to divest their assets at these airports exclusively to ULCCs such as Allegiant in the large majority of cases, such that JetBlue and Spirit would not be present at the same airports nor consolidate greater control. JetBlue and Spirit’s offer to divest assets to ULCCs essentially eliminated concerns over the potential reduction of competition for those routes that the DOJ cited in its opposition to the merger.
It may indeed have turned out that fares would have been slightly higher under the merger than Spirit’s had been previously. But that possibility, along with the fact that JetBlue lowers competing airlines’ prices less than Spirit, is negligible when the issue is evaluated in the context of the industry as a whole. According to Judge Young himself, “A post-merger, combined firm of JetBlue and Spirit would likely place stronger competitive pressure on the larger airlines in the country.” The competition lost due to the merger pales in comparison to the additional pressure that would have been exerted on the Big Four to lower prices themselves. As such, it would actually have increased competition in the industry at large, and could have thus helped control skyrocketing air fares and lessened the Big Four’s hold on the industry.
Moreover, the most salient point as to why blocking the merger was a mistake is the most obvious one: Spirit’s eventual collapse. While regulators could not be certain that Spirit would shut down mere years later, the signs were already quite clear, and the company’s shutdown highlights that the economic reality of Spirit was neglected in the DOJ’s decision to block the merger. Judge Young said himself in his February 2023 opinion that “Spirit has already taken steps to slow its growth” and that “Spirit currently has no prediction as to when it will return to profitability.” Spirit was in a poor financial situation. A merger would likely have helped it rebound, through leveraging economies of scale and increased utilization of aircrafts and gates, for example. The DOJ had the opportunity to give Spirit a chance to survive and chose not to take it.
Judge Young did not necessarily err on the legality of the merger, as a merger is unlawful under Section 7 of the Claymore act if there is a reasonable chance that it could reduce competition in any part of the market. The merger could have indeed reduced competition on the small fraction of routes covered by both JetBlue and Spirit where they did not plan to divest their assets. But while the court’s decision may have been legally sound, the DOJ did consumers a great disservice by seeking to block the merger, as this decision did not make economic sense either for the industry or for its consumers.
Despite the DOJ’s best intentions, when an antitrust lawsuit ends up costing consumers instead of protecting them, it has failed its purpose. Reduced competition will now lead to increased fares and further limited choices for customers. Moreover, JetBlue and Frontier may very well be next, as JetBlue has not been profitable for six years, and Frontier’s financial obligations to aircraft manufacturers and lessors continue to pressure the airline. Time will tell if they follow Spirit’s fate, but one thing is now clear: If the Biden DOJ had given it a chance to live, a JetBlue-Spirit airline could now be thriving. Instead, Spirit is gone, and consumers will pay the price.
