September 28, 2022: -On Tuesday, the Justice Department heads to court in Boston, hoping to undo a year-and-a-half-old pact between American Airlines and JetBlue Airways in the Northeast U.S.
The carriers argue the deal permits them to better compete against bigger airlines. But the Biden administration contends the agreement is effectively a coalition that will drive up fares. Last September, the Justice Department, along with the attorneys general of six states and the District of Columbia, sued to block the block, which was approved in the final days of the Trump administration.
The antitrust trial will be a test for President Joe Biden’s Justice Department, tasked with taking a hard stance against threats to competition.
However, the antitrust push has run into obstacles. This month, a federal judge refused the Justice Department’s bid to block UnitedHealth’s acquisition of Change Healthcare. Last week, another federal judge rejected the DOJ’s bid to stop a merger between two major U.S. sugar refiners.
The trial against the airline alliance arrives as JetBlue is trying to acquire discount carrier Spirit Airlines for $3.8 billion to create the country’s fifth-largest airline. This deal faces a high hurdle with regulators, though that deal isn’t a part of the lawsuit.
JetBlue, a quirky New York-based airline, is a low-cost carrier but also offers high-end products like its premium Mint class, and last year, it launched flights to London from New York and Boston. The airline has turned to partnerships and is now a potential acquisition to grow.
“I think what we’ve seen through this and the Spirit merger is management believes they have the challenge to scale growth, and they view the pace of organic growth as too slow,” said Samuel Engel, an aviation analyst at consulting firm ICF.
The airlines’ Northeast Alliance allows them to share revenue, coordinate routes, and sell seats on each other’s planes, which the airlines say helps them better compete against rivals United Airlines and Delta Air Lines in the congested airspace in and around New York City and Boston.
American and JetBlue have about a 31% combined share of the departing seats from the major airports serving New York City, while United has 24% and Delta has 22%, according to ICF data. In Boston, the carriers under the NEA have a 45% combined share of departing seats over Delta’s 24% and United’s 8%.
The alliance “will eliminate huge competition between American and JetBlue that has led to lower fares and higher quality service for consumers travels to and from those airports,” the Justice Department’s suit alleges. “It will closely tie JetBlue’s fate to that of American, diminishing JetBlue’s incentives to compete with American markets across the country.”
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