On Tuesday morning in Boston, a trial regarding an effort by the Department of Justice to break up an alliance between American Airlines and JetBlue Airways is scheduled to begin. This initiative is a part of a larger effort by the Biden administration to aggressively enforce antitrust rules and promote economic competition.
American and JetBlue have combined their operations in Boston and New York as part of a collaboration that was announced in the year 2020 and is known as the Northeast Alliance. Customers are able to purchase flights and participate in customer loyalty programmes offered by competing airlines in these locations. The airlines also share a portion of their earnings and have access to the same airport gates.
American Airlines, the biggest airline in the world measured by market share, and JetBlue believe that the alliance gives them an advantage when competing against United Airlines and Delta Air Lines, who are the major airlines in certain locations. The Department of Justice filed a lawsuit against the collaboration a year ago, alleging that it constitutes an effective partial merger and lessens the amount of available competition.
This month, in a court brief explaining its claims, the Justice Department said that “this case is easy.” In reference to the alliance, it was said that “The NEA avoids rivalry between the biggest airline in the world and a disruptive competitor on flights to and from Boston and New York.” It deprives the public of the advantages that competition has delivered to passengers over the course of the last two decades.
In July, President Biden argued that the aviation sector had become too top-heavy in an expansive executive order fostering economic competition. He said that this was due to the fact that the business had become too monopolised. According to the statistics provided by the Department of Transportation, the four major airlines in the United States, led by American, control two-thirds of the domestic market. The far-off fifth spot is held by Alaska Airlines, while JetBlue is just behind it.
At the time, Mr. Biden requested that the Transportation Department investigate the possibility of enacting new regulations that would mandate that airlines provide passengers with refunds in the event that the services they paid for are not rendered, and that they make all fees associated with their flights transparent to customers. Since then, the department has made a rule proposal about refunds, and on Monday, it made a rule proposal on fee disclosures.
The administration’s attempt to counteract the effects of consolidation will be expanded upon during the Boston study, which is expected to continue for around three weeks. Following the conclusion of the trial, all parties will present their cases in front of United States District Judge Leo T. Sorokin, whose judgement might be delayed by several weeks or possibly many months. Along with a select few economists, the highest-ranking officials from both airlines are scheduled to testify in this case. It is anticipated that Robin Hayes, chief executive officer of JetBlue, would be the first witness.
The Department of Justice intends to claim that the airline alliance undermines competition in an industry that has become highly consolidated as a result of a series of mergers that occurred during the 2000s and into the early 2010s.
According to the arguments made by the government in the brief that was submitted earlier this month, the partnership mitigates the potentially cutthroat rivalry that would otherwise exist between American and JetBlue between Boston and New York. According to the Justice Department, this practise makes it difficult to differentiate between the various airlines and adversely inhibits competition in dozens of markets throughout the United States as well as between London and the United States.
According to the government, American and JetBlue are responsible for more than 85 percent of the income generated by flights between Boston and Phoenix, Rochester, New York, Charlotte, North Carolina, Philadelphia, and Washington National Airport. Additionally, the airlines have a claim to more than half of the total money generated by flights between New York and Los Angeles, Miami, Orlando, Florida, West Palm Beach, Florida, and Phoenix. These routes together account for over a third of the airlines’ total revenue. Federal prosecutors have said that one estimate suggests that the partnership might end up costing passengers as much as 700 million dollars.
The airlines take issue with that line of reasoning and intend to argue that, in the almost two years that the alliance has been in effect, it has neither stifled competition or driven up costs. In point of fact, they claim that the partnership has already begun to provide consumers with certain advantages.
Both American and JetBlue have stated that they have increased the number of travel options available to customers by launching dozens of new nonstop routes, upgrading to larger aircraft with additional seating capacity, and providing customers with additional flight options as well as additional ways to use and earn loyalty rewards.
The airlines also pointed out that United and Delta are powerful competitors in both Boston and New York, which makes it difficult for America and JetBlue to expand their operations in both cities. They also disagreed with the government’s assessment that the partnership should be considered a merger. The airlines, as part of their agreement, committed to avoid coordinating any aspects of pricing, aircraft fleet planning, or flying capacity.
In a related development, JetBlue is now being investigated by the federal government for antitrust violations in connection with its planned merger with Spirit Airlines, which will be placed to a vote by JetBlue’s shareholders the following month.