Sunday, November 28, 2021

US sues to block deal between American Airlines, JetBlue

by David Koenigo | The Associated Press

Justice Departments and officials in six states have filed a lawsuit to block a partnership formed by American Airlines and JetBlue, which they claim will reduce competition and increase fares.

The Justice Department said Tuesday that the settlement would eliminate significant competition in New York and Boston and reduce JetBlue’s incentive to compete against American in other parts of the country.

Attorney General Merrick Garland said the lawsuit was about ensuring fair competition that lets Americans fly at affordable prices.

“In an industry where just four airlines control more than 80% of domestic air travel, American Airlines’ ‘alliance’ with JetBlue is truly an unprecedented maneuver to further strengthen the industry,” Garland said in a statement. ” “If this is allowed to continue it will result in higher fares, fewer options and lower quality service.”

American and JetBlue vowed to fight the lawsuit and continue their alliance unless a court ordered them to stop.

American and JetBlue announced their deal last year and have begun coordinating flights in the Northeast. They argue that it is a pro-consumer arrangement that has helped them launch 58 new routes from four airports in New York and Boston, add flights on other routes and plan new international destinations.

American CEO Doug Parker said blocking the deal would “take away consumer choice and stifle competition, not encourage it. It’s not a merger: American and JetBlue are – and will be – independent airlines.”

The lawsuit comes two months after President Joe Biden issued an executive order to help consumers by increasing competition from government agencies in the airline industry and other parts of the economy.

The Department of Transportation approved the agreement in January during the final days of the Trump administration, with certain conditions. The airlines left some takeoff and landing slots at John F. Kennedy International Airport in New York and Washington Reagan National Airport outside Washington, and they agreed not to cooperate in setting prices.

“Instead of suing now,[the Department of Justice]should wait and monitor and hold us accountable for the benefits we said it would deliver,” JetBlue CEO Robin Hayes said in an interview.

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Hayes denied the Justice Department’s belief that the deal would prevent his airline from competing against American outside the Northeast. He said JetBlue this year began flying from New York to London and between Miami and Los Angeles, which are important routes for the US.

Despite the green light from the Department of Transportation, antitrust attorneys for the Justice Department began examining the deal more closely this spring and requested interviews and documents from the airlines, according to an airline attorney involved in the case.

It became clear over the past three weeks that the Justice Department was likely to file suit, said the lawyer, who spoke on condition of anonymity because discussions with regulators were private.

Airlines call their partnership the Northeast Alliance or NEA. This lets American and JetBlue sell seats on each other’s flights and gives customers a mutual advantage in different frequent-flyer programs.

American and JetBlue argue that the deal is pro-consumer by making their combination a strong competitor in the Northeast. Together, the airlines say, they controlled 16% of the region’s air-travel market before the partnership, and that grew to 24%.

The airlines argue that the Justice Department has no evidence that their agreement is driving fare increases. Air travel prices have been hurt by the pandemic, which continues to cut travel demand and drive down fares.

American and JetBlue argue that nothing in their deal controls pricing, and that each airline will continue to set its own fare.

Southwest Airlines and Spirit Airlines filed formal complaints against the American-JetBlue alliance, however, arguing that—along with a similar deal on the West Coast between American and Alaska Airlines—would make American too big.

The Justice Department’s lawsuit was filed in federal district court in Massachusetts. The department was joined by the attorney generals of California, Massachusetts, Florida, Pennsylvania, Virginia, Arizona and the District of Columbia.

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