The Northeast Alliance on trial: JetBlue and American head to court in US antitrust suit
The U.S. antitrust trial against the Northeast Alliance between JetBlue and American is slated to begin on Tuesday as the airlines seek to convince a judge that their unique partnership increases options for consumers and drives down prices.
The suit, filed by the Department of Justice last year, alleges that by codesharing and collaborating to run complementary route networks through New York and Boston, the alliance would "eliminate significant competition between American and JetBlue that has led to lower fares and higher quality service for consumers traveling to and from those airports."
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American and JetBlue, however, have been vociferous in their defense of the alliance, which it says allows them to offer stronger competition against Delta and United — which dominate the Northeast market — than either airline could do alone. While JetBlue has a strong presence in the Northeast, it remains relatively small and has less of a presence elsewhere in the country. While American remains large, its New York presence has shrunk significantly since the early 2000s, and it can't significantly add service due to slot restrictions in New York.
The airlines have argued that in the 18 months since the alliance began, the cost increases that the DOJ warned about in its initial complaint have failed to materialize. Additionally, the airlines said they have increased capacity in the Northeast region and "improved the quality of travel to and from Boston and New York" through "collaborative scheduling, codesharing, and frequent flyer program integration."
The two airlines announced the alliance in July 2020. While questions surrounding antitrust controls quickly emerged, the alliance received approval in the waning days of the Trump Administration after the airlines agreed to forfeit several slots in New York and Washington, D.C., and to avoid coordinating fares or revenue management.
Nevertheless, in July of last year, President Joe Biden signed an executive order calling for increased competition across a range of sectors to counter consolidation over recent decades, "in order to promote the interests of American workers, businesses, and consumers." The executive order specifically mentioned airlines, reignigting questions about whether the Alliance would be targeted by regulators. The suit was filed the following September.
The trial, which is set to take place in Boston District Court, is expected to take up to three weeks. Current and former executives of both airlines, including the CEOs of JetBlue and American, are expected to testify as witnesses.
Since the suit was filed, JetBlue separately reached a deal to acquire ultra-low-cost carrier Spirit Airlines, outbidding Frontier in an effort to acquire the Florida-based carrier.
That deal, which is also expected to be subjected to intense regulatory scrutiny, is still pending and consequently not expected to impact the Northeast Alliance trial or decision. Spirit, which initially favored Frontier's offer, had previously cited regulatory hurdles to a potential JetBlue deal.
TPG will be on-site at the trial this week, so be sure to check back for updates.