CONSUMER

American Airlines and JetBlue must abandon their partnership in the Northeast, federal judge rules

May 20, 2023, 2:03 PM

FILE - A JetBlue Airbus A320 taxis to a gate on Oct. 26, 2016, after landing, as an American Airlin...

FILE - A JetBlue Airbus A320 taxis to a gate on Oct. 26, 2016, after landing, as an American Airlines jet is seen parked at its gate at Tampa International Airport in Tampa, Fla. The two airlines must abandon their partnership in the northeast United States, a federal judge in Boston ruled Friday, May 19, 2023, saying that the government proved that the deal reduces competition in the airline industry. (AP Photo/Chris O'Meara, File)
Credit: ASSOCIATED PRESS

(AP Photo/Chris O'Meara, File)

American Airlines and JetBlue Airways must abandon their partnership in the northeast United States, a federal judge in Boston ruled Friday, saying that the government proved the deal reduces competition in the airline industry.

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.

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

U.S. District Judge Leo Sorokin wrote in his decision that American and JetBlue violated antitrust law as they carved up Northeast markets between them, “replacing full-throated competition with broad cooperation.”

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

The airlines said they were considering whether to appeal.

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

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

The Justice Department, meanwhile, hailed the ruling.

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

American Airlines cuts 31,000 flights from its November schedule

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

But soon after President Joe Biden took office, the Justice Department took another look. It found an economist who predicted that consumers would spend more than $700 million a year extra because of reduced competition.

American is the largest U.S. airline and JetBlue is the sixth-biggest overall. But in Boston, they hold down two of the top three spots, alongside Delta Air Lines, and two of the top four positions in New York.

The Justice Department sued to kill the deal in 2021, and was joined by six states and the District of Columbia.

“It is a very important case to us … because of those families that need to travel and want affordable tickets and good service,” Justice Department lawyer Bill Jones said during closing arguments.

The trial featured testimony by current and former airline CEOs and economists who gave wildly different opinions on how the deal would affect competition and ticket prices.

The airlines and their expert witnesses argued that the government couldn’t show that the alliance, which had been in place for about 18 months at the time, had led to higher fares. They said it helped them start new routes from New York and Boston. And most importantly, they said, the deal benefitted consumers by creating more competition against Delta and United Airlines.

The judge was not persuaded.

“Though the defendants claim their bigger-is-better collaboration will benefit the flying public, they produced minimal objectively credible proof to support that claim,” he wrote. “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.”

Hanging over the trial was JetBlue’s proposed $3.8 billion purchase of Spirit Airlines, the nation’s largest discount carrier. In March, while Sorokin was mulling his decision, the Justice Department sued to block that deal too, arguing that it would reduce competition and be especially harmful to consumers who depend on Spirit to save money.

JetBlue has countered that acquiring Spirit will make it a bigger, stronger low-cost competitor to Delta, United, Southwest — and American — which together control about 80% of the domestic U.S. air-travel market.

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

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American Airlines and JetBlue must abandon their partnership in the Northeast, federal judge rules