DOJ filed an anti-trust suit challenging the American Airlines-JetBlue alliance

Sep 21, 2021

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The Department of Justice filed an anti-trust lawsuit against the alliance between American Airlines and JetBlue.

Initial reports of the impending suit came amid increasing signs that the venture, dubbed the Northeast Alliance by the two airlines, would face challenges from the Justice Department.

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In July, President Joseph Biden signed an executive order calling for increased competition across a range of sectors to counter increased consolidation over recent decades, “in order to promote the interests of American workers, businesses, and consumers.”

On Friday, Sen. Richard Blumenthal (D-CT) wrote a letter to the Department of Transportation complaining that the partnership amounted to anti-competitive coordination between the two carriers.

“I write with grave concerns that the recent joint partnership between American Airlines and JetBlue Airways will lead to anticompetitive coordination at key air traffic hubs and result in the long-term inflation of airfares and related costs for airline passengers,” Blumenthal wrote. “I urge the Department of Transportation to conduct a full public interest review and investigation of the Northeast Alliance cooperative agreement—consistent with President Biden’s recent Executive Order on Competition—before taking any further action on merits of this venture.”

Also on Friday, the Federal Aviation Administration (FAA) said it would award 16 available slots at Newark Liberty International Airport (EWR) to a low-cost carrier, citing the executive order and an effort to increase competition.

“The Department of Justice applauds the Department of Transportation’s efforts to preserve competition from low-cost airlines at Newark airport,” acting assistant attorney general Richard Powers said in a statement in support of the FAA. “Competition in the airline industry – and at Newark airport in particular – is in critically short supply.”

American and JetBlue announced the alliance in July 2020, saying it would collectively allow them to better compete against Delta and United by codesharing on some routes and offering reciprocal frequent flyer benefits. Notably in New York, United and Delta are entrenched as dominant players at the city’s capacity-controlled airports. American and JetBlue say their alliance allows them to compete at scale there, where expansion is hindered by the government’s slot and capacity restrictions.

Questions about whether it violated anti-trust regulations emerged almost immediately following the airlines’ announcement, and emerged again in recent weeks following the Biden Administration’s executive order, which specifically noted airlines as a sector to be addressed.

The alliance had received approval in the last days of the Trump Administration after the airlines agreed to forfeit several slots in New York and Washington, and to avoid coordinating fares or revenue management.

The airlines implemented the alliance earlier this year, adding new routes and allowing users of both airlines’ loyalty programs to earn miles on each other’s flights.

The airlines have added nearly 60 routes under the alliance, while JetBlue has said that it has hired more than 1,800 workers to support it. The carriers have said that pressure from the alliance has led other carriers to lower fares.

“This has been the biggest catalyst of growth JetBlue has had since we were created,” JetBlue CEO Robin Hayes told Bloomberg in an interview. “The ability to quadruple flights at LaGuardia, add flights at JFK and Newark. None of that would have been possible without the NEA.”

Hayes added that he does not think the alliance is anti-competitive.

More: FAA will offer Newark slots to low-cost airline, spurring competition for United

“We don’t believe there is any case,” Hayes said. “We believe the overwhelming evidence is already pointing to more JetBlue routes, more low fares, more choice. Rather than DOJ looking at that they should continue to monitor and make sure those benefits continue to be delivered.”

It was not immediately clear what the pending suit would mean for passengers, or whether the airlines would continue to roll out reciprocal benefits for their respective loyalty programs.

Featured photo by NYC Russ / Shutterstock.com

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