American Airlines and JetBlue must end Northeast partnership, judge rules: NPR
American Airlines and JetBlue Airways must abandon their partnership in the northeastern United States, a federal judge in Boston ruled Friday, saying the government proved the deal reduces competition in the airline industry.
The ruling is a major victory for the Biden administration, which has used aggressive enforcement of antitrust laws to fight mergers and other arrangements between large companies.
The Department of Justice claimed during a trial last fall that the agreement would ultimately cost consumers hundreds of millions of dollars a year.
U.S. District Judge Leo Sorokin wrote in his decision that American and JetBlue violated antitrust laws when they carved up Northeast markets between them, “replacing full competition with broad cooperation.”
The judge said the airlines provided only minimal evidence that the partnership, called the Northeast Alliance, helped consumers.
The airlines said they are considering whether to appeal.
“We believe the decision is wrong and are considering next steps,” said US spokesman Matt Miller. “The court’s legal analysis is clearly incorrect and unprecedented for a joint venture such as Northeast Alliance. There was no evidence in the record of any consumer harm from the partnership.”
JetBlue spokeswoman Emily Martin said her airline was disappointed, adding: “We made it clear during the trial that the Northeast Alliance has been a great win for customers.”
The Ministry of Justice, meanwhile, hailed the ruling.
“Today’s decision is a victory for Americans who depend on competition between airlines to travel affordably,” Attorney General Merrick Garland said in a statement.
The partnership had the Trump administration’s blessing when it took effect in early 2021. It allowed the airlines to sell seats on each other’s flights and share the revenue from them. It covered many of their flights to and from Boston’s Logan Airport and three airports in the New York City area: John F. Kennedy, LaGuardia and Newark Liberty in New Jersey.
But soon after President Joe Biden took office, the Justice Department took another look. It found one economist predicting that consumers would spend more than $700 million a year extra because of reduced competition.
American is the largest US airline and JetBlue is the sixth largest overall. But in Boston they hold two of the top three spots, along with Delta Air Lines, and two of the top four spots in New York.
The Justice Department sued to kill the deal in 2021, and was joined by six states and the District of Columbia.
“It’s a very important issue for us … because of those families who need to travel and want affordable tickets and good service,” Justice Department attorney Bill Jones said during closing arguments.
The trial featured testimony from current and former airline CEOs and economists who offered wildly different opinions about how the deal would affect competition and fares.
The airlines and their expert witnesses argued that the government could not show that the alliance, which had been in place for about 18 months at the time, had led to higher fares. They said it helped them launch new routes from New York and Boston. And most importantly, they said, the deal benefited consumers by creating more competition against Delta and United Airlines.
The judge was not persuaded.
“Although the defendants claim that their bigger-is-better cooperation will benefit the flying public, they produced minimal objectively credible evidence to support that claim,” he wrote. “Whatever the benefits to American and JetBlue of becoming more powerful — in the Northeast generally or in their shared rivalry with Delta — such benefits arise from a bare-bones agreement not to compete with one another.”
Hanging over the litigation was JetBlue’s proposed $3.8 billion purchase of Spirit Airlines, the nation’s largest discount carrier. In March, as Sorokin pondered his decision, the Justice Department also sued to block that deal, arguing that it would reduce competition and be particularly harmful to consumers who rely on Spirit to save money.
JetBlue has countered that acquiring Spirit would make it a bigger, stronger low-cost competitor to Delta, United, Southwest — and American — which together control about 80% of the domestic U.S. air travel market.
The government’s lawsuit against the JetBlue-Spirit deal is pending before a different judge in the same courthouse in Boston.