UPDATE 1-JetBlue, Spirit urge US appeals court to allow merger to go forward

(Adds details on court filing, background on litigation in paragraphs 3-9)

By Nate Raymond

BOSTON, Feb 26 (Reuters) - JetBlue Airways and Spirit Airlines on Monday urged a U.S. appeals court to overturn a judge's ruling that blocked their $3.8 billion merger at the U.S. Department of Justice's request.

The airlines in a brief told the Boston-based 1st U.S. Circuit Court of Appeals that the judge wrongly barred their merger despite recognizing it would "improve competition, and thus reduce prices, for the vast majority of consumers."

The airlines said the rationale driving the deal was by buying Spirit, JetBlue would roughly double in size and become a viable challenger to the four carriers that dominate U.S. airline travel.

Yet they said that U.S. District Judge William Young on Jan. 16 nonetheless held that the deal violated federal antitrust law after he "improperly chose to elevate the interest of a small set of hypothetical consumers over the interest of everyone else."

Young, who presided over a non-jury trial, concluded the deal would harm consumers by eliminating no-frills Spirit's low fares and its ability to put pressure on other higher-priced airlines.

The Justice Department is slated to respond to the airlines' appeal on April. 11. The court plans to hear arguments in June, ahead of the July 24 deadline the companies' merger agreement set out to close the deal.

The appeal stems from an antitrust lawsuit by the Justice Department and the Democratic state attorneys general from six states and the District of Columbia, who sued to block the deal arguing it would lead to fewer flights and higher prices for millions of Americans.

JetBlue had tried to address U.S. regulators' concerns about the deal by agreeing to divest gates and slots at key airports in New York City; Boston; Newark, New Jersey; and Fort Lauderdale, Florida.

The acquisition, bringing together the nation's sixth- and seventh- largest airlines, would give the merged company control of 10.2% of a domestic market dominated by four larger airlines. JetBlue had argued the deal would allow it to better compete against them. (Reporting by Nate Raymond in Boston; Editing by Bill Berkrot)