Spirit Airlines and the Destructive Misdiagnosis Behind Antitrust Populism

On Saturday, Spirit Airlines officially shut down all operations.

The announcement came after negotiations for a nine-figure government bailout fell through. The budget airline was unable to continue business with the soaring price of jet fuel that has resulted from Trump’s war on Iran. But that was merely an accelerant. Spirit’s financial trouble goes back to the covid years.

All airlines were hit hard by the covid lockdowns. But even after most travel resumed and government bailouts were paid out, Spirit was unable to bounce back. That was largely because the economic effects of the lockdowns and inflation hit its customer base especially hard.

Also, the airline had a lot of debt that needed to be paid off and was struggling as price inflation on various inputs made its ultra-low-cost model harder to sustain.

Then, in 2022, a potential lifeline appeared in the form of a proposed merger between Spirit and JetBlue. After a few months of negotiations, a deal was reached in which JetBlue would buy Spirit for $3.8 billion. Spirit’s fleet and various assets would be absorbed by JetBlue, increasing its market share to the point where it would just begin to compete with the so-called “Big Four” (United, Delta, American, and Southwest).

But it would never happen.

In 2023, the Biden administration sued to block the merger on antitrust grounds. The government reasoned that the deal threatened competition in the airline industry because it would remove Spirit’s ultra-low prices from several routes, to the benefit of the Big Four.

The lawsuit was part of the Biden administration’s broader effort to pursue a so-called “neo-Brandeisian” approach to antitrust. The neo-Brandeisians believe in focusing primarily on market share, or the size of a firm within a specific industry, when determining if a company needs to be broken up.

This approach has enjoyed a surge in popularity among populists on both the left and right in recent years because the emphasis on size, rather than specific business practices or prices, has been seen as a useful way to go after some of the big villains of Big Business, such as Amazon, RealPage, and Ticketmaster.

To cash in on the excitement about this “new approach” to combating the excesses of Big Business, the Biden administration appointed neo-Brandeisian figures like Lina Khan to the FTC and Jonathan Kanter to the DOJ.

As a result, the administration was far more active on the antitrust front than any of its recent predecessors—arguably more than any antitrust coalition since the late 1970s. However, these antitrust ideologues hit roadblocks when trying to break up the big firms on their target list. So, much of their efforts were redirected towards blocking and derailing mergers. A strict rewrite of the government’s official Merger Guidelines was the big neo-Brandeisian victory of the Biden years, and it has remained in place—in part because this philosophy enjoys some support from several populist right-wingers in the Trump administration.

The merger between JetBlue and Spirit Airlines was simply one casualty in that campaign. It may not have prevented a consolidation that would have dominated the airline market. But, to the neo-Brandeisians, it forced Spirit to continue putting pressure on the Big Four with their ultra-low ticket prices.

The problem, of course, is that those ultra-low ticket prices were unsustainable in the post-covid economy that the government’s pandemic policies had created. Spirit continued to struggle. It suffered heavy economic losses, declared bankruptcy twice, and was finally put entirely out of business over the weekend as the price of jet fuel skyrockets.

So now, Spirit’s price pressure is entirely gone, and all of its planes and assets will be absorbed, not by a small competitor of the Big Four, but likely by the top airlines themselves. This is, assuming they’re genuine about their aims, the exact opposite of what the populist antitrusters were trying to bring about.

But that isn’t surprising at all. The neo-Brandeisians have zeroed in on and committed to a flawed and destructively blunt tool—antitrust—and are attempting to use it to solve a problem they have misdiagnosed.

There are, to be sure, a lot of reasons to oppose Big Business. In the years since the financial crisis, especially, many Americans have been waking up to the fact that the economy is structured and warped to benefit the firms and executives at the top of most industries. And they’re right.

But that is not some natural outgrowth of free-market competition or the result of “market share” tipping out of balance a bit, requiring nothing more than some government tinkering. It is because, for over a hundred years by this point, Big Business has been using government power to destroy their competitors and to immunize themselves from potential future competition. And that includes air travel.

The federal government and top airlines have worked together, from the beginning, to ensure that a small number of government-favored companies dominate the industry. That started in the 1930s when, just as passenger air travel was beginning to grow out of the airmail industry, the Postmaster General unilaterally reorganized routes and industry shares to divide the majority of the market between four companies of his choosing.

The specific airlines that have dominated under this government-compelled oligopoly have evolved over time, but that level of artificial concentration has remained because the underlying regulatory structure that created it is still in place.

In addition to that, today, air traffic control is monopolized by the FAA and limited to government-favored airlines. In fact, an airline cannot take off or land at a commercial airport at all without first receiving a “slot” from the FAA.

Even the airports themselves are owned by local governments, meaning the allocation of the airport amenities, resources, and services that airlines need is determined by political officials rather than market forces.

The government’s monopolization of airline security also removes any need for airlines to compete to provide a safer yet more convenient flying experience than their competitors. And the government makes it illegal for any international airlines to fly domestic routes, further shielding American companies from genuine market competition.

Importantly, as with other industries, this airline-specific regulatory system was not originally built up to serve the interests of American consumers and only later corrupted by a small handful of large companies. It was built up to its current form in order to benefit the small group of airlines the government favors at the moment—airlines that have been more than happy to later share the wealth with their allies in government.

Which is why the only way to meaningfully fix the airline industry, break up this artificial concentration, and force these companies to genuinely put the interest of customers first is to eliminate the government interventions they use to artificially constrain competition and warp the industry to their favor.

Because they not only ignored the true underlying problem but also attempted to roll out even more government interventions, the self-identified populist, anti-Big Business neo-Brandeisians didn’t merely fail to take on the big airlines. Their efforts were siphoned into an antitrust intervention that has now greatly benefited the very oligopoly they were trying to defeat. And, once again, it’s American consumers who will pay the price.