Global Courant 2023-05-20 04:00:43
A federal judge in the United States has ruled that two major airlines must end their regional cooperation in the northeastern part of the country within 30 days, citing the risk of higher fares and reduced competition.
Friday’s decision, regarding American Airlines and JetBlue Airways, marks a victory for the US Justice Department, which filed a lawsuit in 2021 to block the “unprecedented domestic alliance” between the two airlines.
In his ruling, Massachusetts District Judge Leo Sorokin denounced the deal as entwining “JetBlue with American in a way that diminishes its status as an independent, low-cost player in the marketplace.”
He also reiterated the Justice Department’s concerns that the partnership would stifle competition from other airlines.
“These two powerful airlines act as a single entity in the Northeast, dividing markets between them and replacing full competition with broad cooperation,” Sorokin wrote in his conclusion.
JetBlue Airways also faces a second challenge from the US Department of Justice in its acquisition of budget airline Spirit (File: Fred Prouser/Reuters)
But JetBlue and American Airlines have argued that their partnership, dubbed the Northeast Alliance, would have actually allowed the two carriers to better compete in the region against rivals like Delta Air Lines and United Airlines.
“We made it clear throughout the process that the Northeast Alliance has been a huge win for customers,” a JetBlue spokesperson said in a statement following Friday’s decision.
The spokesperson added that the partnership enabled the low-cost airline to expand its “low fares and great service to more routes than would otherwise have been possible”.
American Airlines also overturned the judge’s ruling. “The court’s legal analysis is grossly inaccurate and unprecedented for a joint venture,” the company said.
Both JetBlue and American Airlines saw their shares drop following the ruling, dropping 1.8 and 1.5 percent respectively.
The two companies first announced a deal in July 2020 to sell seats on each other’s flights, in an effort to bolster their markets in New York and Boston.
The alliance was approved by the outgoing administration of Republican President Donald Trump and will go into effect in early 2021. But in September of that year, the Justice Department under Democratic President Joe Biden sued to shut down the alliance.
US Attorney General Merrick Garland has aggressively pursued antitrust cases in industries such as technology and health insurance (File: Kevin Lamarque/Reuters)
“In an industry where only four airlines control more than 80 percent of domestic air traffic, American Airlines’ ‘alliance’ with JetBlue is, in effect, an unprecedented maneuver to further consolidate the industry,” said Attorney General Merrick Garland, a spokesperson for the United States. Biden appointee. said in a statement at the time.
Six states and the District of Colombia also joined the antitrust suit for alleged harm to consumers. The Justice Department lawyers cited estimates that the alliance could cost ticket buyers anywhere from $500 million to $700 million in increased fees per year.
American Airlines has the largest fleet of any airline in the US and JetBlue the sixth largest.
The Biden administration has aggressively pursued antitrust cases since taking office, including in other industries, including sugar refining, internet advertising, health insurance and more.
Friday’s case was not the only antitrust suit the government has brought against low-cost airline JetBlue. In March it launched a complaint in Massachusetts to block JetBlue’s acquisition of another low-cost carrier, Spirit, again citing the prospect of reduced competition and higher prices.
“Businesses in every industry should understand by now that this Justice Department will not hesitate to enforce our antitrust laws and protect American consumers,” Garland said in a statement.
