New American-JetBlue Alliance Under Scrutiny

A new strategic alliance between JetBlue Airways and American Airlines, approved by outgoing Department of Transportation Secretary Elaine Chao before she resigned on Monday, Jan. 11 and announced the next day, is already drawing scrutiny amidst fears of reduced competition in some markets and increased fares.

The two carriers entered into a northeast regional-based agreement to “accelerate each carrier’s recovery from the pandemic as customers are attracted to the expansion of options and enhanced service.”

JetBlue, based at John F. Kennedy International Airport in New York, will expand its service out of nearby LaGuardia Airport, as well as Newark-Liberty International in New Jersey and Logan Airport in Boston.
American will introduce two long-haul trips out of New York – one to Athens and one to Tel Aviv, its first international offerings from New York in four years.

But now the alliance is under scrutiny, according to Politico, from everyone including rival carriers, antitrust experts and members of Congress. The department placed conditions on the deal, including that the airlines divest some slots at capacity-constrained airports in D.C. and New York. But the DOT did not open the deal for public comment, and its disclosures don’t indicate whether the joint venture was reviewed by the Justice Department, which Politico noted normally offers views on the potential competition concerns posed by airline alliances.

The DOT also did not specify that the slots that American and JetBlue are selling off as a condition of the alliance go to low-fare carriers, a break with how the Obama administration handled similar arrangements.

“I am concerned that the Department of Transportation approved the American/JetBlue alliance without meaningful public input just days before the start of a new administration,” Sen. Amy Klobuchar (D-Minn.), who is set to chair the Senate Judiciary Committee’s antitrust subcommittee, told Politico. “Although the airlines and airline workers need support to make it through this crisis, it should not be at the expense of consumers.”

In an agreement dated Jan. 10 between the airlines and DOT, American and JetBlue pledged not to communicate with each other about the fares they charge and to collectively divest seven slots at New York’s John F. Kennedy International Airport and six at Ronald Reagan Washington National Airport.

But again, this agreement was accompanied by the usual public comment period. As a result, Spirit Airlines has already filed a complaint with the DOT, saying that a conservative estimate of the JetBlue-American alliance would lead consumers to pay $383 million more each year for airfare, a five percent increase over current fares.

Spirit said the alliance makes JetBlue and American “essentially monopolists at (Reagan National) and duopolists with Delta at (John F. Kennedy and LaGuardia in New York), and with United at (Newark-Liberty International) in New Jersey, with no possibility of new entry at any of those airports or even at Boston where there are virtually no available ground facilities.”

“If American and JetBlue coordinate their services at these airports as the press reports indicate, JetBlue would obviously no longer be considered an independent [low-cost carrier] providing competitive discipline to American or other legacy carriers,” Southwest Airlines said in a letter to the DOT.

But airline industry analyst Robert Mann said the comments against the deal were “sour grapes.”