American Airlines and JetBlue must end their partnership in the Northeast, rules rules: NPR

A JetBlue Airbus A320 taxis to a gate October 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 October 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

American Airlines and JetBlue Airways must drop their partnership in the northeastern United States, a Boston federal judge ruled on Friday, saying the government had proven the deal reduced competition in the airline industry.

The ruling is a major victory for the Biden administration, which has used aggressive antitrust enforcement to fight mergers and other big-corporate arrangements.

The Justice Department argued in a trial last fall that the deal would cost consumers hundreds of millions of dollars a year.

U.S. District Judge Leo Sorokin wrote in his ruling that American and JetBlue violated antitrust law by dividing the Northeast markets between them, “replacing full-throated competition with broad-based cooperation.”

The judge said the airlines had provided only minimal evidence that the partnership, called the Northeast Alliance, had helped consumers.

The airlines said they were considering appealing.

“We believe the decision is wrong and are considering next steps,” US spokesman Matt Miller said. “The court’s legal analysis is simply incorrect and unprecedented for a joint venture like Northeast Alliance. There was no evidence on the record of consumer harm caused by the partnership.”

JetBlue spokeswoman Emily Martin said her airline was disappointed, adding: “We made it clear at trial that the Northeast Alliance was a huge win for customers.”

The Justice Department, meanwhile, welcomed the decision.

“Today’s decision is a victory for Americans who rely on competition among airlines to travel affordably,” Attorney General Merrick Garland said in a statement.

The partnership had the blessing of the Trump administration when it took effect in early 2021. It allowed the airlines to sell seats on each other’s flights and share their revenue. It covered many of their flights to and from Logan Airport in Boston and three New York area airports: John F. Kennedy, LaGuardia and Newark Liberty in New Jersey.

But soon after President Joe Biden took office, the Justice Department took another look. He found an economist who predicted that consumers would spend more than $700 million a year more due to 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, alongside 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.

“This is a very important case for us…because of these families who need to travel and who want affordable tickets and good service,” Justice Department attorney Bill Jones said during closing arguments. .

The lawsuit featured testimony from current and former airline CEOs and economists who gave starkly different opinions on how the deal would affect competition and ticket prices.

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

The judge was not convinced.

“Although the defendants claim that their ‘bigger is better’ collaboration will benefit the flying public, they have produced minimal objectively credible evidence to support this claim,” he wrote. whether the benefits to American and JetBlue of becoming more powerful — in the Northeast generally or in their shared rivalry with Delta — those benefits come from a naked agreement not to compete with each other.

Dangled above the lawsuit was JetBlue’s proposed $3.8 billion purchase of Spirit Airlines, the nation’s largest discount carrier. In March, as Sorokin considered his decision, the Justice Department also filed a lawsuit to block the deal, arguing that it would reduce competition and be particularly harmful to consumers who depend on Spirit to save money. money.

JetBlue countered that acquiring Spirit would make it a bigger and stronger low-cost competitor to Delta, United, Southwest – and American – which together control about 80% of the US domestic airline market.

The government’s lawsuit against the JetBlue-Spirit deal is pending before another judge in the same Boston courthouse.