How JetBlue and American Lost Their Bid to Dominate the Skies

Have you ever wondered why some airlines seem to have more flights and lower fares than others in certain regions? Well, it’s not because they are more efficient or popular, but because they have formed partnerships with other airlines to share routes, schedules, and profits. These partnerships are called alliances, and they can have a huge impact on the competition and consumer choice in the airline industry.

One of the most recent and controversial alliances was between American Airlines and JetBlue Airways, two of the largest carriers in the Northeast. They announced their partnership, called the Northeast Alliance, in early 2021, with the approval of the Trump administration. They claimed that their alliance would benefit consumers by creating a stronger competitor to Delta Air Lines and United Airlines, which also have alliances in the region.

However, not everyone was convinced by their arguments. The Biden administration, which took office shortly after the alliance was launched, decided to take another look at the deal and sued to block it in 2021. They were joined by six states and the District of Columbia, which argued that the alliance would reduce competition, raise fares, and lower service quality for travelers in the Northeast.

The Trial and the Ruling

The case went to trial in Boston in late 2021, where both sides presented their evidence and arguments. The Justice Department hired an economist who predicted that consumers would spend more than $700 million a year extra if American and JetBlue stopped competing with each other in the Northeast. They also showed that the two airlines had carved up markets between them, reducing their incentives to offer lower prices or better service.

The airlines defended their alliance by pointing to new routes they had added, which they said were possible only because of the increased demand generated by the partnership. They also argued that their alliance helped them survive the covid-19 pandemic, which had devastated the travel industry. They claimed that their alliance was pro-competitive and pro-consumer, and that breaking it up would harm both travelers and workers.

After a month-long trial, U.S. District Judge Leo Sorokin issued his ruling on May 19, 2023. He sided with the government and ordered American and JetBlue to dismantle their partnership in the Northeast within 90 days. He said that the government had proved that the alliance reduced competition in the airline industry, and that the airlines had offered only minimal evidence that it helped consumers. He wrote that through their alliance, American and JetBlue “replaced full-throated competition with broad cooperation.”

The Implications and the Reactions

The ruling is a major victory for the Biden administration, which has used aggressive enforcement of antitrust laws to fight against mergers and other arrangements between large corporations. It is also a boost for consumer advocates and smaller airlines, who have long complained about the dominance of a few major carriers in the U.S. market.

The ruling is a blow for American and JetBlue, which have said that their partnership was crucial for their growth and survival in the Northeast. They have also said that their partnership helped them compete with Delta and United, which have similar alliances with other airlines. They have indicated that they will appeal the ruling and seek a stay of its enforcement.

The ruling could also have implications for other alliances in the airline industry, such as Delta’s partnership with WestJet in Canada or United’s partnership with Air Canada. It could also affect JetBlue’s pending offer to buy Spirit Airlines, which it announced in December 2021. JetBlue argues that its $3.8 billion bid would create a stronger low-cost competitor to Delta, United, Southwest — and American — which together control about 80% of the domestic U.S. air travel market.

Conclusion

The Northeast Alliance between American Airlines and JetBlue Airways was one of the most ambitious and controversial partnerships in the airline industry. It aimed to create a dominant force in the Northeast market by combining two of the largest carriers in the region. However, it faced strong opposition from the government, which sued to block it on antitrust grounds.

After a lengthy trial, a federal judge ruled in favor of the government and ordered American and JetBlue to end their partnership within 90 days. He said that the alliance reduced competition and harmed consumers in the Northeast. The ruling is a win for the Biden administration’s antitrust agenda and a loss for American and JetBlue’s growth plans.

The ruling could also affect other alliances in the airline industry or future mergers between carriers. It could also change how travelers book flights or choose airlines in the Northeast or elsewhere.