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JetBlue, American Airlines go to court in Justice Department antitrust fight

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The Justice Department heads to court in Boston on Tuesday in hopes of undoing a year-and-a-half-old pact between American Airlines and JetBlue Airways within the Northeast U.S.

The carriers argue the deal allows them to higher compete against larger airlines. However the Biden administration contends the agreement is effectively a merger that may drive up fares. Last September, the Justice Department together with the attorneys general of six states and the District of Columbia sued to dam the partnership, which was approved in the ultimate days of the Trump administration.

The antitrust trial will probably be a test for President Joe Biden’s Justice Department, which has been tasked with taking a tough stance against threats to competition.

Nevertheless, the antitrust push has run into obstacles. Earlier this month, a federal judge denied the Justice Department’s bid to dam UnitedHealth’s acquisition of Change Healthcare. Last week, one other federal judge rejected the DOJ’s bid to stop a merger between two major U.S. sugar refiners.

An American Airlines plane lands on a runway near a parked JetBlue plane on the Fort Lauderdale-Hollywood International Airport on July 16, 2020 in Fort Lauderdale, Florida.

Joe Raedle | Getty Images

The trial against the airline alliance comes as JetBlue is within the strategy of trying to accumulate discount carrier Spirit Airlines for $3.8 billion to create the country’s fifth-largest airline, a deal that faces a high hurdle with regulators, though that partnership is not a component of the lawsuit.

JetBlue, a unusual Latest York-based airline, identifies as a low-cost carrier but additionally offers high-end products like its premium Mint class, and last 12 months launched flights to London from Latest York and Boston. The carrier has turned to partnerships and now a possible acquisition to grow.

“I believe what we have seen through this and thru the Spirit merger is management believes they’ve a challenge to scale growth and so they view the pace of organic growth as too slow,” said Samuel Engel, an aviation analyst at consulting firm ICF.

The airlines’ Northeast Alliance allows them to share revenue, coordinate routes and sell seats on one another’s planes, which the airlines say help them higher compete against rivals United Airlines and Delta Air Lines within the congested airspace in and around Latest York City and Boston.

American and JetBlue have a couple of 31% combined share of the departing seats from the foremost airports serving Latest York City, while United has 24% and Delta has 22%, in keeping with ICF data. In Boston, the carriers under the NEA have a forty five% combined share of departing seats over Delta’s 24% and United’s 8%.

The alliance “will eliminate significant competition between American and JetBlue that has led to lower fares and better quality service for consumers traveling to and from those airports,” the Justice Department’s suit alleges. “It can also closely tie JetBlue’s fate to that of American, diminishing JetBlue’s incentives to compete with American in markets across the country.”

American and JetBlue, in a pretrial temporary filed Saturday, said that there is no such thing as a evidence that buyers have been harmed by the alliance and that it allows them to expand in capacity-constrained airports where they would not have the opportunity to on their very own.

Witnesses are expected to incorporate the airlines’ top executives, including JetBlue’s CEO, Robin Hayes, the primary witness scheduled for Tuesday. Other airlines’ executives could also testify.

The trial begins as Biden and other administration officials are taking a tough line against airline performance following a rise in cancellation and delay rates through the summer.

On Monday, Biden announced a proposal for a latest rule to require airlines and online travel agencies to supply passengers with fee information for add-ons like seat selection on the time they’re trying to find fares. In the summertime, the Transportation Department proposed stricter rules for passenger refunds when flights are canceled or delayed.

“Nobody’s ever lost votes for being critical of airlines,” said Matt Colbert, who previously managed operations and methods at several U.S. carriers and is founding father of consulting firm Empire Aviation Services.

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