A federal judge in Boston ruled on Friday that American Airlines and JetBlue Airways must end their cooperation in the northeast United States because the government established the pact decreases competition in the airline market.
The verdict is a huge win for the antitrust enforcement efforts of the Biden administration, which has been actively fighting against corporate mergers and other arrangements.
In a trial held last autumn, the Justice Department asserted that the contract will raise prices for consumers by hundreds of millions of dollars annually.
U.S. District Judge Leo Sorokin said in his opinion that American and JetBlue broke antitrust law by dividing up markets in the Northeast and “replacing full-throated competition with broad cooperation.”
The judge ruled that the airlines failed to provide sufficient evidence that the Northeast Alliance benefited passengers.
The airlines indicated that they were thinking about filing an appeal.
American spokesman Matt Miller stated, “We believe the decision is wrong and are considering next steps.” The court’s interpretation of the law is clearly wrong and has never been applied to a partnership like the Northeast Alliance before. No documented cases of consumer harm due to the collaboration could be found.
JetBlue spokeswoman Emily Martin expressed her company’s displeasure, saying, “We made it clear at trial that the Northeast Alliance has been a huge win for customers.”
Meanwhile, the Justice Department applauded the decision.
Attorney General Merrick Garland stated in a statement, “Today’s decision is a win for Americans who rely on competition between airlines to travel affordably.”
When the alliance began operating in early 2021, it received the approval of the Trump administration. The airlines were able to sell seats on each other’s planes and split the proceeds. Numerous flights to and from Logan Airport in Boston and John F. Kennedy Airport, LaGuardia Airport, and Newark Liberty Airport in New Jersey were included.
However, the Justice Department took another look not long after Vice President Joe Biden assumed office. An economist was found who hypothesised that consumers would spend an additional $700,000,000 year as a result of decreased competition.
JetBlue is the sixth largest airline in the world, although American is the largest in the United States. However, they are two of the top four in the Big Apple and one of the top three in Boston (tied with Delta Air Lines).
In 2021, the Justice Department and six states and the District of Columbia filed a lawsuit to invalidate the accord.
Bill Jones, a lawyer for the Department of Justice, said that “it is a very important case to us… because of those families that need to travel and want affordable tickets and good service” in the court’s closing arguments.
Current and former airline CEOs, as well as economists, testified at the trial, and they all had vastly different predictions for how the transaction would effect competition and ticket costs.
Although the alliance had been in place for almost 18 months by this point, the airlines and their expert witnesses maintained that the government had failed to prove that it had resulted in higher fares. They said that it allowed them to launch additional services out of New York and Boston. They also claimed that the consumers benefited from the merger since it increased competition for airlines like Delta and United.
The judge did not see things your way.
In spite of the defendants’ assertions that the travelling public will profit from their “bigger is better” agreement, judge noted that “minimal objectively credible proof” had been provided. To paraphrase, “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 naked agreement not to compete with one another.”
The projected $3.8 billion acquisition of Spirit Airlines, the largest budget carrier in the United States, by JetBlue hung over the trial. While Sorokin was debating what to do in March, the Justice Department filed a lawsuit to stop the deal, citing concerns that it would reduce competition and hurt customers who rely on Spirit to find good deals.
While Delta, United, Southwest, and American control around 80% of the domestic U.S. air-travel market between them, JetBlue argues that acquiring Spirit will give it a bigger, stronger low-cost competitor to these airlines.
A different judge in the same Boston courthouse is currently hearing the government’s case against the JetBlue-Spirit merger.