A Justice Department effort to interrupt up an alliance between American Airlines and JetBlue Airways is about to go to trial in Boston on Tuesday morning, a part of a broad Biden administration push to aggressively implement antitrust rules and promote economic competition.
Under the partnership, announced in 2020 and known as the Northeast Alliance, American and JetBlue joined forces in Boston and Recent York. In those cities, the airlines share some revenue and access to airport gates and permit customers to purchase trips and participate in loyalty programs on the airlines interchangeably.
American, the world’s largest airline by market share, and JetBlue say the alliance helps them to compete against the dominant carriers in those cities, United Airlines and Delta Air Lines. The Justice Department sued last 12 months to stop the partnership, arguing that it’s effectively a partial merger and reduces competition.
“This case is easy,” the Justice Department wrote this month in a legal temporary describing its arguments. Referring to the alliance, it added: “The NEA eliminates competition between the most important airline on the planet and a disruptive competitor on flights to and from Boston and Recent York. It deprives the general public of the advantages that the rivalry has delivered to passengers for 20 years.”
In July, President Biden called out airlines in a sweeping executive order promoting economic competition, arguing that the industry had turn out to be too top-heavy. Led by American, the nation’s 4 largest airlines control two-thirds of the domestic market, in keeping with Transportation Department data. Alaska Airlines is a distant fifth, followed closely by JetBlue.
On the time, Mr. Biden asked the Transportation Department to think about latest rules requiring airlines to issue refunds when services aren’t provided and to obviously disclose fees to consumers. The department has proposed rules on refunds since then and, on Monday, proposed one other on fee disclosures.
The Boston trial, scheduled to last about three weeks, builds on that administration effort to counter the consequences of consolidation. Both sides will make its case in U.S. District Court before Judge Leo T. Sorokin, whose decision could come weeks and even months after the trial concludes. Top executives from each airlines are expected to testify, as are a handful of economists. JetBlue’s chief executive, Robin Hayes, is predicted to be the primary witness.
The Justice Department plans to argue that the airline alliance eliminates competition in an industry that became heavily concentrated after a series of mergers within the 2000s and early 2010s.
The alliance neutralizes the otherwise fierce competition between American and JetBlue in Boston and Recent York, the federal government argued within the temporary this month. It also blurs the road between the airlines and severely hinders competition in dozens of markets domestically and between London and america, the Justice Department said.
American and JetBlue account for greater than 85 percent of all revenue earned from flights between Boston and Phoenix, Rochester, N.Y., Charlotte, N.C., Philadelphia and Washington National Airport, the federal government said. The airlines even have a claim to greater than half of all revenue earned from flights between Recent York and Los Angeles, Miami, Orlando, Fla., West Palm Beach, Fla., and Phoenix. In keeping with one estimate, the alliance could cost travelers as much as $700 million, federal prosecutors said.
The airlines reject that argument and plan to make the case that over the 12 months and a half that the partnership has been in place, it has neither limited competition nor increased prices. In actual fact, they are saying, the alliance has yielded some consumer advantages.
“Considering that there isn’t any evidence of opposed effects, the NEA has been all upside for traveling consumers,” the airlines said in a legal filing this month.
American and JetBlue said that they had increased travel options by introducing dozens of latest nonstop routes, trading out smaller planes for larger ones with more seats and offering customers more flight options and more ways to make use of and earn loyalty rewards.
The airlines also noted that United and Delta are formidable forces in each Boston and Recent York, making it difficult for America and JetBlue to grow. They usually rejected the federal government’s contention that the tie-up amounts to a merger. Under their deal, the airlines agreed to not coordinate on pricing, aircraft fleet plans or flight capability.
JetBlue is individually facing federal antitrust scrutiny over a proposed $3.8 billion merger with Spirit Airlines, which will probably be put to a vote amongst JetBlue’s shareholders next month.