A Boston federal court decided Friday that American Airlines and JetBlue Airways must end their northeast US alliance because the government established it lowers airline competition.
The Biden administration’s vigorous antitrust action against mergers and other massive corporate arrangements won the verdict.
In a trial last autumn, the Justice Department said the contract would cost customers hundreds of millions of dollars annually.
U.S. District Judge Leo Sorokin ruled that American and JetBlue violated antitrust law by “replacing full-throated competition with broad cooperation” in Northeast markets.
The judge noted the airlines provided little evidence that the Northeast Alliance benefits customers.
Airlines considered appealing.
“We believe the decision is wrong and are considering next steps,” said American spokesperson Matt Miller. “The court’s legal analysis is clearly wrong and unprecedented for the Northeast Alliance.” No partnership-related consumer damage was found.”
JetBlue spokesperson Emily Martin said, “We made it clear at trial that the Northeast Alliance has been a huge win for customers.”
The Justice Department applauded the verdict.
“Today’s decision is a win for Americans who rely on competition between airlines to travel affordably,” Attorney General Merrick Garland stated.
In early 2021, Trump approved the arrangement. It enabled airlines sell seats on each other’s flights and split earnings. It covered several of their flights to and from Boston’s Logan Airport and New York City’s John F. Kennedy, LaGuardia, and Newark Liberty airports.
The Justice Department reconsidered once President Joe Biden took office. Due to reduced competition, one economist anticipated customers would spend over $700 million more a year.
American is the top U.S. airline while JetBlue is sixth. They are two of the top three in Boston, along with Delta Air Lines, and two of the top four in New York.
In 2021, the Justice Department and six states, and the DC sued to terminate the accord.
“It is a very important case to us… because of those families that need to travel and want affordable tickets and good service,” Justice Department lawyer Bill Jones said during closing arguments.
Current and former airline CEOs and economists provided drastically different perspectives on how the agreement will influence competition and ticket costs at the trial.
The airlines and their expert witnesses contended that the government couldn’t prove that the 18-month-old alliance had raised rates. It enabled them launch lines from New York and Boston. Most significantly, the agreement increased competition between Delta and United Airlines, benefiting customers.
Judge was unconvinced.
“Though the defendants claim their bigger-is-better collaboration will benefit the flying public, they produced minimal objectively credible proof to support that claim,” he said. “Whatever the benefits to American and JetBlue of becoming more powerful—in the northeast generally or in their shared rivalry with Delta—such benefits arise from a naked agreement not to compete with one another.”
JetBlue’s $3.8 billion acquisition of Spirit Airlines, the nation’s largest budget carrier, overshadowed the trial. While Sorokin was deliberating, the Justice Department moved to prevent that merger, alleging that it would restrict competition and hurt Spirit customers.
JetBlue claims that purchasing Spirit will give it a bigger, stronger low-cost rival to Delta, United, Southwest, and American, which dominate nearly 80% of the domestic U.S. air-travel market.
Another judge in Boston is hearing the government’s complaint against the JetBlue-Spirit agreement.