American Airlines and JetBlue Declare Northeast Alliance a “Win” for Passengers
JetBlue and American Airlines pushed back against a Unite States District Court ruling that they must dismantle the Northeast Alliance (NEA), with the two carriers claiming it was a winning proposal for customers.
US District Court for the District of Massachusetts Judge Leo Sorokin ruled on May 19, 2023, that the NEA “operating as it was designed and intended by American and JetBlue, substantially diminishes competition in the domestic market for air travel”, giving the airlines 30 days from May 19, 2023, to discontinue and never implement the NEA again.
Sorokin ruled that by American Airlines and JetBlue combining operations in New York and Boston, the two airlines essentially acted as a single entity in the region, “allocating markets between them and replacing full-throated competition with broad cooperation”. As a result, Sorokin said this upset the competitive balance in the “highly concentrated industry” with the two carriers overlapping not only on a single route or several origin and destination (O&D) points but “throughout the northeast and beyond”.
And since neither of the parties provided evidence “of any cognizable procompetitive effects arising from the NEA”, the judge and the court concluded that “the NEA plainly violates Section 1 of the Sherman Act”.
The Sherman Act is an antitrust law in the US, which was passed by Congress in 1890 as, according to the US Federal Trade Commission (FTC), a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade”.
In a statement issued on May 22, 2023, American Airlines said that “the ruling was “wrongly decided” and it is “currently considering its next steps in this litigation”.
In a previous statement from May 19, 2023, American Airline said that the alliance had “been a huge win for customers and anything but anticompetitive”. Meanwhile, in a statement issued on May 19, 2023, by JetBlue stated that the airline was “disappointed” with the decision by Sorokin, with the carrier making it clear at the trial that the NEA “has been a huge win for customers”.
“Through the NEA, JetBlue has been able to significantly grow in constrained northeast airports, bringing the airline’s low fares and great service to more routes than would have been possible otherwise. We are studying the judgment in full and evaluating our next steps as part of the legal process,” JetBlue concluded.
DOJ is happy with the ruling
US Attorney General Merrick Garland said that the decision was a “win” for consumers in the country, reiterating that the Department of Justice (DOJ) “will continue to protect competition and enforce our antitrust laws in the heavily consolidated airline industry and across every industry”.
The DOJ sued the NEA in September 2021, arguing that the alliance “will not only eliminate important competition in these cities, but will also harm air travelers across the country by significantly diminishing JetBlue’s incentive to compete with American elsewhere, further consolidating an already highly concentrated industry”.
However, the DOJ is also involved in another lawsuit against the proposed merger between JetBlue and Spirit Airlines. The DOJ and the two airlines are set to go to court in October 2023. Both JetBlue and Spirit Airlines indicated during their Q1 2023 financial results updates that the merger would be completed by H1 2024.
In another case, the DOJ is reportedly also considering suing a planned merger between Korean Air and Asiana Airlines based on competition concerns. The European Commission (EC) already ruled against the merger, arguing that the two South Korean airlines coming together would hurt passenger and cargo routes between Europe and South Korea.