American Airlines and JetBlue Must End Partnership in Northeast, Rules of Arbitration: NPR

A federal judge in Boston on Friday ruled that American Airlines and JetBlue Airways must end their partnership in the northeastern U.S. because the government has shown the deal reduces competition in the airline industry.

The ruling is a major victory for the Biden administration, which has used tough enforcement of antitrust laws to fight mergers and other arrangements between large companies.

The Justice Department argued at trial last fall that the deal would ultimately 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 when they divided Northeast markets among themselves and “replaced intense competition with broad cooperation.”

The judge said the airlines provided little evidence that the partnership, called the Northeast Alliance, helped consumers.

The airlines said they were considering going ahead.

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

JetBlue spokeswoman Emily Martin said her airline was disappointed, adding: “We’ve shown on the ground that the Northeast Alliance has been a huge win for customers.”

Meanwhile, the Justice Department praised the ruling.

“Today’s decision is a victory for Americans who rely on airline competition for affordable travel,” Attorney General Merrick Garland said in a statement.

The partnership received the Trump administration’s blessing when it went into effect in early 2021. It allowed airlines to sell seats on each other’s flights and share the revenue. It has covered many of their flights to and from Logan Airport in Boston and three airports in the New York City area: JFK, LaGuardia, and Newark Liberty in New Jersey.

But shortly after President Joe Biden took office, the Justice Department took a closer look. It found an economist who predicted that consumers would spend more than $700 million annually due to reduced competition.

American is the largest airline in the United States and JetBlue is the sixth largest airline overall. But in Boston, they had two of the top three seats, along with Delta Airlines, and two of the top four seats in New York.

The Justice Department sued to have the deal reversed in 2021, and six states and the District of Columbia joined.

“It’s a very important issue for us…because of those families who have to travel and want affordable tickets and good service,” Justice Department attorney Bill Jones said during closing arguments.

The trial included testimony from current and former airline CEOs and economists who offered widely differing views on how the deal would affect competition and ticket prices.

The airlines and their expert witnesses argued that the government could not prove that the alliance, then in existence for about 18 months, had pushed up fares. They said it helped them start new routes from New York and Boston. More importantly, they said, the deal benefited consumers by creating more competition against Delta and United Airlines.

The judge was not convinced.

He wrote: “While the defendants claim that their greater cooperation would be better for the flying public, they have provided minimal credible objective evidence in support of this claim.” “Whatever benefits it has for America and Jet Blue to become more powerful — in the Northeast generally or in their shared rivalry with Delta — those benefits come from an express agreement not to compete with each other.”

Commenting on the experience was JetBlue’s proposed $3.8 billion purchase of Spirit Airlines, the nation’s largest low-cost carrier. In March, as Sorokin was considering his decision, the Justice Department sued to block that deal as well, arguing it would reduce competition and be especially harmful to consumers who rely on Spirit to save money.

JetBlue responded that the acquisition of Spirit would make it a bigger, stronger and cheaper competitor to Delta, United and Southwest — and American — which together control about 80% of the US domestic air travel market.

The government’s lawsuit against the JetBlue-Spirit deal is pending in another judge in the same Boston court.