JetBlue and American Airlines take legal action in Justice Department antitrust fight

An American Airlines plane lands on a runway near a parked JetBlue aircraft at Fort Lauderdale-Hollywood International Airport on July 16, 2020 in Fort Lauderdale, Florida.

Joe Raedle | Getty Images

The Justice Department heads to court in Boston on Tuesday hoping to undo a year-and-a-half-old pact between American Airlines and JetBlue Airways in the northeastern United States.

The carriers argue that the agreement allows them to better compete with major airlines. But the Biden administration argues the deal is actually a merger that will drive up tariffs. Last September, the Justice Department along with six state attorneys general and the District of Columbia filed a lawsuit to block the partnership, which was approved in the final days of the Trump administration.

The antitrust lawsuit will be a test for President Joe Biden’s Justice Department, which has been instructed to take a strong stance against threats to competition.

However, the antitrust push has encountered obstacles. Earlier this month, a federal judge rejected the Justice Department’s bid to block UnitedHealth’s acquisition of Change Healthcare. Last week, another federal judge rejected the Justice Department’s bid to halt a merger between two major US sugar refiners.

The lawsuit against the airline alliance comes as JetBlue is in the process of trying to acquire budget carrier Spirit Airlines for $3.8 billion to create the country’s fifth-largest airline, a deal that faces up to a significant hurdle with regulators, although this agreement is not part of the lawsuit.

JetBlue, a quirky New York-based airline, identifies itself as a low-cost carrier but also offers premium products like its premium Mint class, and last year launched flights to London from New York and Boston. The carrier has turned to partnerships and now a potential acquisition to expand.

“I think what we’ve seen through this and through the Spirit merger is that management thinks they’re struggling to scale growth and they see the pace of organic growth as too slow,” said Samuel Engel, an aviation analyst at consultancy ICF.

The airlines’ Northeast Alliance allows them to share revenue, coordinate routes and sell seats on each other’s planes, which the airlines say helps them better compete with rivals United Airlines and Delta Air Lines in the congested airspace of New York and Boston.

American and JetBlue have a combined share of about 31% of seats departing from major airports serving New York, while United has 24% and Delta 22%, according to ICF data. In Boston, carriers under the NEA have a combined 45% share of outbound seats, compared to 24% for Delta and 8% for United.

The alliance “will eliminate significant competition between American and JetBlue that has led to lower fares and better service for consumers traveling to and from these airports,” the Justice Department lawsuit alleges. “It will also tie the fate of JetBlue tightly to that of American, which will reduce JetBlue’s incentives to compete with American in markets across the country.”

American and JetBlue, in a preliminary brief filed Saturday, said there was no evidence that consumers were harmed by the alliance and that it allows them to expand into capacity-constrained airports where they don’t could not do it alone.

Witnesses are expected to include senior airline executives, including JetBlue CEO Robin Hayes, the first witness scheduled for Tuesday. Executives from other airlines could also testify.

The lawsuit begins as Biden and other administration officials take a hard line against airline performance following an increase in cancellation and delay rates over the summer.

On Monday, Biden announced a proposed new rule requiring airlines and online travel agencies to provide passengers with fee information for add-ons such as seat selection when they search for fares. Over the summer, the Department for Transport proposed tougher rules for reimbursing passengers when flights are canceled or delayed.

“No one has ever lost a vote for criticizing airlines,” said Matt Colbert, who previously ran operations and strategies for several US carriers and is the founder of consulting firm Empire Aviation Services.

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