The Department of Justice ruled on Friday that American Airlines and JetBlue Airways must dismantle the carriers’ long-term partnership.
The Northeast Alliance was the first legal challenge to what the White House said was anti-consumer behavior. American CEO Robert Isom testified in October that the carrier was hindered in markets like New York and Boston because of the head start that Delta Air Lines and others had as blockbuster mergers shrunk the industry over the last two decades.
“The question before the Court is whether the NEA (Northeast Alliance) suppresses or promotes competition,” U.S. District Court Judge Leo Sorkin wrote in his ruling published Friday. “The record supports only one answer. The NEA, operating as it was designed and intended by American and JetBlue, substantially diminishes competition in the domestic market for air travel.”
American Airlines and JetBlue Airways didn’t immediately respond to requests for comment from The Dallas Morning News.
The lawsuit, which dates back to Sept. 2021, calls the alliance an “unprecedented and anticompetitive pact.” It said the alliance would eliminate competition between American and JetBlue, which in turn led to lower fares and higher quality for consumers.
In March, a lawsuit was filed by the Biden Administration to block JetBlue Airways’ $3.8 billion purchase of Spirit Airlines. The Justice Department alleged it would hurt low-budget travelers who depend on Spirit to find cheaper options.
The White House has made the airline industry a key target in touting a pro-consumer agenda, opposing airline mergers and alliances and proposing new rules for compensating passengers in the event of delays and cancellations.
The case has major implications for the future of the airline industry, not only in the relationship between JetBlue and Fort Worth-based American, but also for the pending merger between JetBlue and discount carrier Spirit Airlines. Antitrust experts doubted the government’s ability to win the case after allowing major airline industry mergers such as the pairing of US Airways and American Airlines, Delta and Northwest and United and Continental.
With the ruling, American and JetBlue must dismantle their partnership within 30 days, a task that involves untangling hundreds of flights in the New York and Boston region.
American and JetBlue touted the partnership as a pro-consumer move, combining the strengths of each airline to theoretically lower costs and provide more choice. American, which is weak in New York and Boston, would have access to JetBlue’s strong position there, while JetBlue could put its customers in those markets on American Airlines flights that connect to more than 200 destinations in other parts of the U.S. and internationally.
The airlines said the alliance created 50 new routes of New York and Boston-area airports, increased frequencies on 130 routes and resulted in 17 new international routes.
But Sorkin didn’t buy the arguments, debated in a month-long bench trial in Boston that featured witness testimony from top executives at American and JetBlue along with other notable industry leaders. American witnesses, including chairman Doug Parker and chief commercial officer Vasu Raja, were both defensive and sometimes flippant about defending the partnership.
“There is no doubt that savvy executives representing both defendants earnestly believe the NEA promotes the interests of their respective shareholders and will strengthen American and JetBlue in their rivalry against Delta (and, to a lesser extent, United) in New York and Boston,” Sorkin wrote in the ruling. “It is similarly beyond dispute that the NEA involves substantial coordination by two powerful competitors in an industry that, on a domestic level, is closely regulated, highly concentrated, and often volatile.”
Testimony was sometimes embarrassing, such as when Raja recounted how American Airlines lost count of precious and valuable slots at JFK International Airport after the merger with US Airways in 2013.
Airline passenger advocates called it a win for consumers.
“Blocking this de-facto merger forces JetBlue and American to continue competing, eliminating anticompetitive revenue-sharing incentives and setting an important precedent against future consolidation in the industry,” said William J. McGee, Senior Fellow for aviation and travel at the American Economic Liberties Project in a statement. “We hope to see a similar ruling in favor of the Justice Department’s suit against the JetBlue-Spirit merger, another illegal deal that would accelerate concentration and drive up fares nationwide.”
