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Breaking Up is Hard to Do: Did JetBlue and American Airlines Really Think They Could Get Away with Plans for a Northeast Alliance?

by Aoife O’Riordan

Aug 5, 2023
August 2023

On May 19, U.S. District Judge Leo Sorokin in Boston ordered American Airlines and JetBlue to end their partnership. Sorokin argued the partnership greatly reduces competition in the domestic market. Of course, both American Airlines and JetBlue have had a lot to say following the ruling. But did the airlines consider the harm the partnership could have done to consumers and overall competition in the Boston and New York markets? Probably, but they tried anyway.

The alliance between the two airlines, which American Airlines called “pro-competitive” and “pro-consumer,” was announced in summer 2020, marking an unprecedented partnership between two U.S. domestic carriers. In early 2021, during the final days of the Trump administration, the alliance was approved with a few conditions, a decision instantly met with anger from other airlines, especially Southwest Airlines and Spirit Airlines.

The alliance allowed the airlines to coordinate schedules under a new codeshare and share revenues in Boston and New York. The airlines could also enjoy joint ticketing and reciprocal loyalty benefits. American Airlines heavily relied on its partnership with JetBlue in the New York market to compete with Delta Air Lines and United Airlines. Under the Biden administration, however, almost immediate action was taken to reanalyze the partnership. And, in September 2021, the Department of Justice under Biden sued to block the partnership, with the District of Columbia and six other state attorneys soon joining the lawsuit. The suit claimed the alliance violated Section 1 of the Sherman Act because it increased prices and reduced choices for American travelers.
So much for the alliance being pro-competitive and pro-consumer.

“This sweeping partnership is unprecedented among domestic airlines and amounts to a de facto merger between American and JetBlue in Boston and New York City,” said Attorney General Richard A. Powers, Antitrust Division, Department of Justice. “The impact on consumers extends far beyond Massachusetts and New York, as evidenced by the participation and our ongoing cooperation with Attorneys General from across the country, including Arizona, California, Florida, Massachusetts, Pennsylvania, Virginia and the District of Columbia, in this lawsuit.”

As expected, American Airlines and JetBlue said the alliance did no such thing. JetBlue claimed the partnership would be a “huge win” for customers, while American Airlines expressed dismay at the eventual ruling, calling it “incorrect.”

But this ruling has even more implications, especially for JetBlue. The airline could now potentially lose its pending merger with Spirit Airlines, which the DOJ already sued to block, as well. JetBlue hopes the end of its merger with American Airlines will allow for more focus on its pending merger with Spirit Airlines. And with another merger possibly facing the chopping block, we must ask ourselves, why did these airlines think they could get away with such overpowering alliances?

Well, JetBlue tried justifying the alliance. In November 2022, JetBlue president Joanna Geraghty argued how, in response to the Northeast Alliance, Delta Air Lines doubled down in Boston and United added more capacity in Newark. Geraghty claimed Delta Air Lines and United Airlines had competitive responses, which, in turn, leads to increased competition and competitive prices.

But is this really the same thing? Not at all. Delta Air Lines and United Airlines do not have an alliance or merger like the Northeast Alliance, so even comparing the two is pointless, but it’s worth a shot, right?

Maybe it’s a “we are the biggest and therefore can do what we want” complex. After all, American Airlines and JetBlue are two of the four largest carriers operating in New York and two of the largest three carriers in Boston. American Airlines is also the largest carrier overall in the United States.

Delta Air Lines even responded to the potential merger between American Airlines and JetBlue in its investor relations meeting in early July 2023, expressing confidence in the airline’s position in the Northeast.

“We compete well in New York. We’ve had a long history of competing well in New York, and we’re really confident on that — as it evolves, that we’ll be able to continue to win in New York, which has been our long-term strategy for 10 years, and we’re not deviating from that,” said Glen William Hauenstein, president, Delta Air Lines.

So, it’s safe to say competing airlines like Delta Air Lines, although frustrated at the initial prospect of the Northeast Alliance, aren’t sweating it following the ruling. An airline trying to keep pricing fair for consumers can sleep well at night, and Delta Air Lines does. Perhaps we can’t say the same about American Airlines and JetBlue.

 

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