Due to the potential for increased costs and less competition, a federal court in the United States has ordered that two major airlines dissolve their regional alliance in the nation’s northeast within 30 days.
The US Justice Department has won after Friday’s ruling involving American Airlines and JetBlue Airways, which it had sued to prevent from forming a “unprecedented domestic alliance” in 2021. Spirit Airlines will be bought by JetBlue for $3.8 billion.
Leo Sorokin, the district judge for Massachusetts, criticized the agreement in his decision, saying it “diminishes JetBlue’s status as an independent, low-cost player in the market.”
He also shared the Justice Department’s worries that the alliance will limit rival airline competition.
In his judgement, Sorokin said that the two strong carriers “act as one entity in the Northeast, allocating markets between them and replacing full-throated competition with broad cooperation.” However, according to JetBlue and American Airlines, their alliance, known as the Northeast Alliance, would have actually helped the two airlines compete more effectively in the area against competitors like Delta Air Lines and United Airlines.
“We made it clear at trial that the Northeast Alliance has been a huge win for customers,” a JetBlue representative said in a statement after the ruling on Friday.
The spokesman noted that the alliance made it possible for the low-cost airline to fly on more routes than would have been feasible without it.
American Airlines also criticized the judge’s decision. The business claimed that the court’s legal reasoning was “clearly incorrect” and unheard of for a joint venture.
Following the decision, shares of JetBlue and American Airlines fell by 1.8 and 1.5 percent, respectively. In an effort to expand their respective markets in New York and Boston, the two businesses originally announced a pact in July 2020 to sell tickets on each other’s flights.
Early in 2021, the partnership came into force after being ratified by Republican President Donald Trump’s departing government. But by September of that year, Democratic President Joe Biden’s Justice Department had filed a lawsuit to halt the collaboration. At the time, Attorney General Merrick Garland, who was appointed by Biden, stated in a statement that “in an industry where just four airlines control more than 80% of domestic air travel, American Airlines’ ‘alliance’ with JetBlue is, in fact, an unprecedented maneuver to further consolidate the industry.”
The anti-trust case, which claims damage to consumers, was also joined by six states and the District of Columbia. The Justice Department’s attorneys highlighted projections that the partnership might increase ticket prices by $500 million to $700 million annually.
JetBlue has the sixth-largest fleet of all US airlines, behind American Airlines. Since assuming office, the Biden administration has actively pursued antitrust charges in a variety of businesses, including the sugar industry, internet advertising, health insurance, and more.
The government has brought further anti-trust lawsuits against the low-cost carrier JetBlue in addition to the one on Friday. It filed a case in Massachusetts in March to stop JetBlue from buying Spirit, another low-cost carrier, again citing the possibility of less competition and higher costs.
“Companies in every industry should understand by now that this Justice Department will not hesitate to enforce our antitrust laws and protect American consumers,” said Garland in a statement.