Deutsche Bank sees limited grounds for Spirit’s JetBlue-United objection

Spirit Airlines has filed a complaint with the U.S. Department of Transportation (DOT) against the JetBlue-United “Blue Sky” partnership, alleging anticompetitive practices. However, Deutsche Bank analysts dismiss Spirit's claims as lacking substance, noting Blue Sky is an interline agreement without revenue sharing or capacity coordination, similar to the approved American-Alaska deal. Deutsche Bank argues Spirit's assertions about fare increases and airport access are unfounded, suggesting the complaint could backfire on Spirit due to its weak basis.

Analysis

Spirit Airlines' (SAVE) recent complaint to the Department of Transportation (DOT) regarding the JetBlue (JBLU) and United Airlines (UAL) "Blue Sky" partnership is viewed by Deutsche Bank analysts as lacking substantive evidence and potentially detrimental to Spirit itself. The complaint alleges anticompetitive practices, yet Spirit reportedly admitted to having limited information to support its claim. According to the analysis, the Blue Sky partnership is fundamentally an interline agreement featuring frequent flyer reciprocity and slot-swapping, notably without the revenue sharing or capacity coordination that led to the termination of the JetBlue-American Airlines Northeast Alliance. The analysts highlight that the JetBlue-United deal is a less integrated version of the American-Alaska accord, a model previously cited by regulators as acceptable. Deutsche Bank directly refutes Spirit's arguments, stating that claims of fare hikes from mileage costs are likely "backwards" and that the partnership could enhance consumer surplus by providing United with crucial access to JFK's global network. The key takeaway is the significant risk Spirit is undertaking; by filing a weak complaint, the airline exposes itself to potential regulatory blowback, a historically observed pattern where a company's own public record is used against it.

Key Decisions for Investors

• Investors in JetBlue and United should view Spirit's complaint as a low-impact event, as the partnership's structure appears to align with regulatory precedent, making a successful challenge unlikely.
• Holders of Spirit Airlines stock should be cautious, as the complaint is perceived as weak and could backfire, potentially creating negative regulatory scrutiny and reputational damage for the company.
• The situation reinforces the importance of deal structure in airline partnerships; investors should monitor the DOT's reaction not just for its impact on these specific carriers, but as a barometer for future collaborations in the sector.