Thread by @David_Slotnick

Good morning, I'm back in court this morning for the JetBlue-Spirit antitrust trial.

Eric Friedman, JetBlue's director of route planning, is currently being questioned by DOJ.

We're looking at some market analysis that JetBlue ran on overlapping markets.

We're looking at calculations of TRASM, CASM, etc., and how, in one model, JetBlue defined Spirit routes as overperforming or underperforming compared to JetBlue's average margins. The idea being that it's part of how a combined airline would assess how to deploy Spirit's fleet.

The gist is that there's some overlap, and establishing that JetBlue could choose to end some Spirit routes. Friedman notes that it's a quick and formulaic analysis, and that there are reasons the airline would keep some underperforming routes.

Talking about revenue synergies and relevance. DOJ asks if it's saying that JetBlue has more pricing power at airports where they have a larger presence. Friedman says he'd characterize it more as being more relevant to more customer segments.

Judge asked how that translates to revenue. Friedman says, in essence, it's because passengers are more likely to choose to fly JetBlue in that case.

A few months went by after merger agreement before the airlines started working on the combined network plan.

A slideshow with combined network plan presented in early-mid May, DOJ asking if it was created for the DOJ specifically, Friedman says no.

Ok, there actually was a slideshow made for DOJ, looking at that now and talking about divestitures.

Even with divesting Spirit's gates at BOS, a combined JetBlue-Spirit could keep the same number of frequencies on JetBlue's existing gates.

Currently operating 140 daily flights from BOS, pre-Covid was 185. So the operating environment has changed, Friedman says. "In Boston, we have room to add flights."

Reiterates that they're divesting Spirit's gates.

FLL, JetBlue assumes it will receive additional gates by 2027. Friedman says his understanding is that two new gates in terminal being built will go to JetBlue.

Slide describing plan to make a new "focus city" with a lot of connectivity. Friendman declines to call it a "connecting hub," though. Semantics.

Talking about the "30% fare increase" figure that has been going around. Friedman testifies that it results from a theoretical model attempting to simplify and quantify the current differences between the JetBlue and Spirit models — not a plan for future fares.

April 2023 email with quarterly network review. According to presentation, JetBlue was going to forgo 5 A321neo leases baked into the budget, but not signed for.

Those five plane leases would generate positive variable P&L of up to $63-69m

Forgoing leases would reduce 2024 capacity by 0.4-0.5 points, or 2-2.2pts by 2025, depending on Mint vs. high density configuration (not quite sure how those 2025 numbers are so high).

In the Spirit acquisition, could have been viewed as a low-capex solution to fund Spirit retrofit lines.

DOJ arguing that JetBlue declined opportunity to acquire aircraft that would have let JetBlue grow on a standalone basis, without Spirit. "It's all in the eyes of the beholder," Friedman says.

Ah, forgot to say, we're on a brief recess.

We're back, defense is going.

Talking about the 30% figure. They looked at Spirit route exits from 2014-2018. Looked at public data, observed impacts on average fares. Average fare increases, market size impacts, used as inputs to a model to identify JetBlue-Spirit product differential premium.

Did this in 2019, amid discussions of possible Spirit transaction.

Took the 30% figure and tried to hone it in.

Those were not updated in 2022.

JetBlue Effect, from a network/route perspective: Stimulating passenger demand faster than decreasing fares. So involves lowering prices, but the goal is to grow revenue by increasing demand at the same time.

Back to the 30% figure and the broader model: Did not factor in other ULCCs competing. It was simply to quantify the difference between the two airlines' products, Friedman says, not "a magic 8 ball" to figure out what will actually happen to fares.

Total Revenue: Fares, ancillaries, things like rental cars or vacation packages, revenue from co-share credit card, etc.

Friedman says: For average Spirit customer, a range of outcomes. Some might see JetBlue product and pay for it. Some might not, but might be able to get same Spirit-level fare. Some may go to alternative ULCCs.

FLL is largest growth in network plan. 250 planned departures.

AA has 350 in MIA, 1,000 at DFW. ATL has >800/day from ATL. Etc.

Shoutout for @cirium Diio today

@cirium American Airlines is the primary competitor in south Florida, looking at revenue, passenger share and seat share, Friedman says.

Orlando: Lots of competition. Depending on metric, Delta or Spirit is the largest competitor, but it's fierce overall, he says.

*Delta* has >800/day at ATL

https://twitter.com/David_Slotnick/status/1722651768960495788

Competition today nationally characterized by dominance of Big 4, Friedman says. JetBlue always trying to increase and expand, but it's challenging, remain mostly an East coast airline

Looking at a weekly competitive change report from Cirium.

Discussing focus cities vs. hubs.

We've been talking broadly about expanding, competing against hub carriers, growth strategies, etc.

Defense is finished, government has a few follow-ups.

And we're done for the day. Judge Young is noting that there is no court tomorrow or Monday due to Veteran's Day.

Government expects to rest the day before Thanksgiving break. Says they're running slightly ahead of schedule. Finishing with main witnesses next week and continuing on to the expert economists.

Judge asks the court to give a thought to servicemembers tomorrow, past and present. The judge for whom *he* clerked was heading an artillery unit on the original armistice day.

"President Reagan had it right: Freedom is a fragile thing. It is never more than a generation away from extinction."

And we're in recess.