Spirit Airlines is in the news as its massive debt burden can no longer be serviced, especially with its pricing model and cost structure, forcing it to declare bankruptcy. The discount airline is not going out of business, or at least not for now, but is reorganizing through bankruptcy court. Its stockholders have had their investments wiped out, and the bondholders are getting a haircut - they too may lose everything. If the reorganization doesn’t work out, Spirit may eventually shut down.
This is all part of the cycle of failed startups, successful corporations, wealth creation, creative destruction, etc. that we who champion capitalism understand and expect.
But the “pro-business” editors at the Wall Street Journal are appalled that the government has not come to Spirit’s rescue by consenting to a competition-suppressing merger with JetBlue Airlines. That merger would have reduced the number of major airlines to just five, who combined would have 78% control of the market. In an editorial earlier this week, the WSJ Editorial Board opined that not allowing the airlines to coalesce into an even tighter oligopoly is “anti-business” and would result in “less competition.”
For the record, I am assertively pro-free market and pro-capitalism, but I am distressed how the term “pro-business” is now becoming a synonym for the embrace of anti-competitive corporatism.
The WSJ editorial makes the case that “the Justice Department cut off a lifeline by blocking its merger with JetBlue Airways.” No, bankruptcy court still remained as a lifeline, and the court has now been engaged.
This line was particularly funny, coming from the Wall Street Journal’s editorial page:
Too bad the government won’t compensate the workers, flyers and creditors harmed by its blunder.
This is the same editorial page that spent decades championing the destruction of American manufacturing while celebrating the economic displacement of those whose jobs were offshored. We now know of at least one occasion when the Wall Street Journal does not rejoice at working class Americans losing their jobs.
[Justice Department] antitrust chief Jonathan Kanter never lets economic reality interfere with his anti-business crusades. DOJ challenged the merger as anti-competitive.
The Justice Department hailed the [JetBlue - Spirit] deal’s termination as “a victory for U.S. travelers who deserve lower prices and better choices.” Now passengers can look forward to fewer choices and higher prices as a result of Spirit’s bankruptcy.
More competitors is “anti-competitive.” More airlines to choose from is “fewer choices.” Advocating for more businesses in a market is “anti-business.” War is peace. Freedom is slavery.
Don’t forget, Spirit will continue to fly post-bankruptcy filing, and it will be competing with Jet Blue rather than being a part of JetBlue.
The Wall Street Journal might consider me “anti-business” since I want businesses to face competition - and possibly fail - rather than consolidate into a too-big-to-fail cartel that allocates customers, rather than competing for them. And maybe Spirit will still not survive at all, despite its visit to the bankruptcy court. Fine. Let another challenger rise in it place.
Outside of JetBlue and Spirit, there are four airlines that control 68% of the US airline market: American Airlines, United Airlines, Delta Airlines, and Southwest. There are many once-great airline names such as TWA, US Air, America West, Western Airlines, Continental Airlines, Northwest Orient, and others that have merged, consolidated, merged some more, and consolidated some more to get down to these four airlines. Rest assured, there will be merger talk among these remaining carriers too, with all the usual suspects stating that we need to let the airlines consolidate further – in the name of “competition.”
Throckmorton’s First Law of Live Music: “If there’s an upright bass in the band, it’s probably going to be good.”
In the spirit of today’s topic, here is Merle Haggard’s classic “Silver Wings” as performed by the Kenny Vaughan Trio from a beer-soaked honky-tonk in Nashville.
I’ve been in enough honky-tonks and dancehalls in my life that I can actually smell this video as I watch it.
Have a great weekend.
[buck.throckmorton at protonmail dot com]