DOJ Wins Bid to Block American Airlines, JetBlue Alliance

In a significant legal development, a federal judge in Boston has ruled in favor of the Justice Department (DoJ), ordering American Airlines and JetBlue Airways to dismantle their partnership known as the Northeast Alliance. This decision comes as a boost to the Biden administration’s efforts to prevent consolidation in key industries and uphold competition for the benefit of consumers.

U.S. District Judge Leo T. Sorokin’s decision is seen as a victory for the Justice Department, which has intensified its scrutiny of proposed deals in industries where competition is deemed insufficient. Legal experts had warned that a favorable ruling for American and JetBlue could have paved the way for other carriers to form similar alliances, potentially reducing competition.

Attorney General Merrick Garland hailed the ruling as a win for American consumers, emphasizing the importance of competition in ensuring affordable travel options. Garland reaffirmed the Justice Department’s commitment to protect competition and enforce antitrust laws in the airline industry and across all sectors.

Judge Sorokin’s 94-page decision highlighted the fact that before forming the Northeast Alliance, JetBlue and American were vigorous competitors, competing on various fronts, including fares and customer features. The judge underscored that the alliance fundamentally alters the competitive landscape, transforming the two airlines into partners rather than rivals regularly challenging each other in the market. The defendants’ claims of potential benefits for consumers were deemed unsupported by credible evidence.

The dissolution of the Northeast Alliance is particularly challenging for JetBlue, which is smaller than its competitors. Through the alliance with American, JetBlue had managed to significantly expand its presence in the Northeast, where it previously had a limited market share. American Airlines, in its statement, criticized the court’s legal analysis, stating that there was no evidence of consumer harm resulting from the partnership.

Executives at JetBlue expressed disappointment with the decision,

“We made it clear at trial that the Northeast Alliance has been a huge win for customers,” JetBlue said in a statement. “Through the [Northeast Alliance], 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.

Both American and JetBlue are currently considering their next steps following the ruling.

This ruling comes two months after the Justice Department moved to block JetBlue’s attempted merger with Spirit Airlines, citing concerns about reduced competition and potential fare increases. The loss of Spirit Airlines was deemed particularly harmful to price-sensitive consumers reliant on its low fares.

The Northeast Alliance between American and JetBlue was announced in July 2020, with approval granted by the Department of Transportation, subject to certain conditions, during the final days of the Trump administration. The Justice Department subsequently challenged the agreement in 2021, leading to a court hearing in Massachusetts last fall.

While domestic airline alliances like the Northeast Alliance are rare, they are common internationally. American Airlines, for example, is a founding partner of Oneworld, an international alliance of carriers that includes British Airways and Japan Airlines. These global alliances typically involve sharing planes and airport facilities. However, the recent ruling may deter similar domestic arrangements.

Experts have highlighted the distinction between the Northeast Alliance and other alliances, noting that the sharing of revenue eliminates the incentive for carriers to compete against each other, as any competition would be self-defeating.

While some analysts argue that the alliance between American and JetBlue allowed them to compete more effectively against dominant carriers like Delta and United, others contend that consumers will ultimately suffer from reduced competition. The coordination of schedules facilitated by the alliance made travel more convenient for passengers. However, critics argue that the ruling hands significant advantages to Delta Air Lines and United Airlines, as the diminished competition could limit consumer choice and potentially lead to higher fares.

Judge Sorokin viewed the Northeast Alliance as suppressing competition rather than promoting it, citing evidence presented during the trial. Assistant Attorney General Jonathan Kanter, who leads the Justice Department’s antitrust division, applauded the court’s decision, highlighting the recognition of competition as a crucial value in the airline industry.

“We are pleased with the court’s decision,” he said in a statement. “The outcome of this litigation recognizes the value of competition in the airline industry.”