American Airlines and JetBlue Airways have to break up their alliance on Northeast US flight routes, a US District Court judge ordered Friday.
US District Judge Leo Sorokin ruled in favor of the the Justice Department, giving the Biden administration a victory in its years-long lawsuit against the airlines’ collaboration. The Justice Department filed the lawsuit in 2021, alleging the two companies raised prices and reduced choice for air passengers traveling to and from major cities in the Northeast, such as New York City and Boston.
The airlines have 30 days to end their partnership, Sorokin ruled – just as the busy summer travel season kicks off.
“It is abundantly clear to the Court that the defendants’ primary motivation in establishing the NEA was to strengthen their own competitive positions against Delta (and, to a lesser extent, United) in Boston and New York,” Sorokin wrote in the ruling Friday.
The judge’s ruling Friday said that both airlines are a “formidable and influential player” in air travel – American Airlines Group is the largest airline in the world and JetBlue is the sixth largest airline in the United States, holding significant market power in the Northeast, in particular.
In its lawsuit, the Justice Department said the two companies committed to trading information on which routes to fly, when to fly them, who would fly them, and what size planes to use for each flight. The alliance was established in 2020.
The airlines claimed because of the alliance’s codesharing features, corporate and frequent flyers had broader access to benefits and discounts. But Sorokin ruled these travelers make up a relatively small proportion of American’s customers.
The judge also said the schedule optimization and coordination “has led to decreased capacity, lower frequencies, or reduced consumer choices on multiple routes, including some that are heavily traveled.” It effectively removed an entire competitor from these markets, according to Sorokin, leaving customers with fewer options for traveling between hubs like New York’s LaGuardia and Boston’s Logan airports.
Sorokin said their pact is the “unreasonable restraint on trade” that violates the Sherman Act, the landmark antitrust law.
“Though the defendants claim their bigger-is-better collaboration will benefit the flying public, they produced minimal objectively credible proof to support that claim,” Sorokin said.
The Justice Department also alleged the two airlines shared revenues earned at these airports, eliminating their incentives to compete with one another. In addition, the “Northeast Alliance” allowed the parties to pool their gates and takeoff and landing authorizations, known as “slots,” according to the complaint.
“The department cannot allow American Airlines to further consolidate the airline industry where competition is already in a critical shortage,” Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division told reporters in 2021.
In a statement, American Airlines said it is “disappointed” in the court’s decision and that it’s “studying the judgment in full” and evaluating its “next steps as part of the legal process.”
“We made it clear at trial that the Northeast Alliance has been a huge win for customers,” American said. “Through the NEA, JetBlue has been able to significantly grow in constrained northeast airports, bringing the airline’s low fares and great service to more routes than would have been possible otherwise.”
In March, the Justice Department sued to stop JetBlue’s $3.8 billion offer to buy Spirit Airlines.
US Attorney General Merrick Garland said the merger would significantly harm consumers, particularly those who depend on the low fares available on the budget Spirit Airlines.
CNN has reached out to JetBlue and the Justice Department for comment.
Read the full article here