American Airlines and JetBlue Should End Partnership in Northeast, Arbitration Rules: NPR

A JetBlue Airbus A320 taxis to a gate on Oct. 26, 2016, after landing, as an American Airlines plane is seen parked at its gate at Tampa International Airport in Tampa, Florida.

Chris O’Meara/AP

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Chris O’Meara/AP

A JetBlue Airbus A320 taxis to a gate on Oct. 26, 2016, after landing, as an American Airlines plane is seen parked at its gate at Tampa International Airport in Tampa, Florida.

Chris O’Meara/AP

A federal judge in Boston ruled on Friday that American Airlines and JetBlue Airways must abandon their partnership in the US Northeast, saying the government has demonstrated that the deal reduces competition in the airline industry.

The ruling is a major victory for the Biden administration, which has used tough enforcement of antitrust laws to fight mergers and other arrangements between large companies.

The Justice Department argued during a trial last fall that the deal would ultimately cost consumers hundreds of millions of dollars annually.

US District Judge Leo Sorokin wrote in his decision that American and JetBlue violated antitrust law as they divided the Northeast markets between them, “replacing intense competition with broad cooperation.”

The judge said the airlines presented only little evidence that the partnership, called the Northeast Alliance, helped consumers.

The airlines said they were considering whether to resume.

“We believe the decision was wrong and we are considering the 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 on record of any consumer harm from the partnership.”

JetBlue spokeswoman Emily Martin said her airline was disappointed, adding, “We’ve shown in experience that the Northeast Alliance has been a huge win for customers.”

Meanwhile, the Ministry of Justice praised the ruling.

“Today’s decision is a win for Americans who depend on airline competition for affordable travel,” Attorney General Merrick Garland said in a statement.

The partnership received the Trump administration’s blessing when it went into effect in early 2021. It allowed airlines to sell seats on each other’s flights and share the revenue from them. It has covered many of their flights to and from Logan Airport in Boston and three airports in the New York City area: JFK, LaGuardia and Newark Liberty in New Jersey.

But shortly after President Joe Biden took office, the Justice Department took another look. It found an economist who predicted that consumers would spend more than $700 million annually due to reduced competition.

American is the largest airline in the United States and JetBlue is the sixth largest airline overall. But in Boston, they held two of the top three spots, along with Delta Airlines, and two of the top four spots in New York.

The Justice Department sued to overturn the deal in 2021, and six states and the District of Columbia joined it.

“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 by current and former airline chief executives and economists who offered very different opinions about how the deal would affect competition and ticket prices.

The airlines and their expert witnesses argued that the government could not prove that the alliance, which had been in place for about 18 months at the time, had driven up fares. They said it helped them start new routes from New York and Boston. More importantly, they said, the deal benefited consumers by creating more competition against Delta and United Airlines.

The judge was not convinced.

He wrote, “Although the Defendants allege that their greater-than-the-best co-operation would benefit the flying public, they have produced minimal credible objective evidence in support of this claim.” “Whatever benefits to America and Jet Blue in becoming more powerful—in the Northeast generally or in their shared rivalry with Delta—these benefits arise from an express agreement not to compete with one another.”

Commenting on the experience was JetBlue’s proposed $3.8 billion purchase of Spirit Airlines, the nation’s largest discount airline. In March, as Sorokin contemplated his decision, the Justice Department sued to block that deal as well, arguing that it would reduce competition and be especially harmful to consumers who rely on Spirit to save money.

JetBlue responded that acquiring Spirit would make it a larger, stronger, lower-cost competitor to Delta, United and Southwest — and American — which together control about 80% of the US domestic air travel market.

The government lawsuit against the JetBlue-Spirit deal is pending before a different judge in the same Boston court.