American and JetBlue airlines must end alliance, US judge rules
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[May 20, 2023] By
Diane Bartz and David Shepardson
WASHINGTON (Reuters) -American Airlines Group must end its alliance with
JetBlue Airways Corp, a federal judge ruled on Friday, agreeing with the
U.S. Justice Department that the arrangement means higher prices for
consumers and ordering the companies to part ways within 30 days.
The decision represented a victory for President Joe Biden's
administration, which has taken a hard line on consolidation and tie-ups
in the aviation industry. The Justice Department, six states including
Massachusetts as well as the District of Columbia sued in 2021 to unwind
the deal announced in 2020, calling the "Northeast Alliance" a "de facto
merger" of the American and JetBlue Boston and New York operations that
removes incentives for them to compete.
In his ruling, U.S. District Judge Leo Sorokin said the partnership
"substantially diminishes competition in the domestic market for air
travel."
"These two powerful carriers act as one entity in the northeast,
allocating markets between them and replacing full-throated competition
with broad cooperation," the judge wrote.
American is the largest U.S. airline by fleet size and low-cost carrier
JetBlue is the sixth largest. The airlines use the alliance to
coordinate flights and pool revenue.
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JetBlue shares fell 1.8% for the day, while American closed down 1.5%.
Both airlines said after the ruling they were evaluating their next
steps.
JetBlue said it was disappointed with the decision and that the
"Northeast Alliance has been a huge win for customers" by extending the
airline's low fares "to more routes than would have been possible
otherwise."
American said, "The court's legal analysis is plainly incorrect and
unprecedented for a joint venture." It added that the alliance "has been
a huge win for customers and anything but anticompetitive."
U.S. Attorney General Merrick Garland described the judge's decision as
"a win for Americans who rely on competition between airlines to travel
affordably." Garland said the Justice Department will continue to
protect competition and enforce U.S. antitrust laws across industries,
including the airline industry.
The JetBlue-American partnership was approved by the U.S. Transportation
Department shortly before the end of former President Donald Trump's
administration.
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![](../images/052023PIX/busine16.jpg)
An American Airlines Airbus A321-200
plane takes off from Los Angeles International airport (LAX) in Los
Angeles, California, U.S. March 28, 2018. REUTERS/Mike Blake
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The Justice Department in the lawsuit said the alliance would put
nearly $700 million in extra annual costs on consumers and gives the
airlines more than 80% of market share in flights from Boston to
Washington and six other airports including the New York area's JFK,
LaGuardia and Newark.
Lawyers for JetBlue and American have said the alliance has not
raised air fares or resulted in fewer flights, has expanded flights
and made the two airlines more competitive with Delta Air Lines and
United Airlines on U.S. northeast routes.
Sorokin said the alliance's "effects resemble those of a merger of
the parties' operations within the northeast" and that "American and
JetBlue no longer compete with one another within the scope" of the
partnership. The judge gave the airlines 30 days to end the
alliance.
Massachusetts Attorney General Andrea Joy Campbell called the ruling
essential for fair competition and "a significant victory ensuring a
more level playing field for Massachusetts consumers and all those
traveling in and out of (Boston) Logan."
Separately, the Justice Department, joined by four states, filed a
suit in March aimed at stopping JetBlue from buying discount rival
Spirit Airlines, saying the planned $3.8 billion merger "will lead
to higher fares and fewer seats, harming millions of consumers on
hundreds of routes." The suit is set for trial in October.
TD Cowen analyst Helane Becker said she believes the American
JetBlue ruling "has negative implications for the JetBlue/Spirit
merger."
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Airline mergers in recent years have led to a highly consolidated
industry in which American, Delta, United and Southwest Airlines
control 80% of domestic travel, the department said.
(Reporting by Diane Bartz and David Shepardson in Washington;
additional reporting by Rajesh Kumar Singh in Chicago; Editing by
Will Dunham and Bill Berkrot)
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