When antitrust issues make the news, it is usually centered around lawmakers and federal regulators seeking to reign in the power of big tech. However, despite the laser focus on big tech, the airline industry has also been in the crosshairs of antitrust enforcers, notably the Northeast Alliance Agreement between American Airlines and Jet Blue. Just this week, lawyers for American Airlines asked the U.S. District Court of the District of Massachusetts to dismiss the antitrust case brought by the Department of Justice in September 2021.
While the antitrust case against American Airlines and Jet Blue is garnering significantly less attention than cases against big tech, the effects of breaking up the Northeast Alliance Agreement could be profoundly damaging for passengers, resulting in fewer direct destinations and increased prices.
Recognizing the impact a successful antitrust suit could bring, dismissing the case is the only way to ensure an increasingly activist Department of Justice cannot degrade the substantial benefits the Northeast Alliance has brought.
In July 2020, during the height of the coronavirus pandemic when passenger numbers collapsed, Jet Blue and American Airlines agreed to create the Northeast Alliance covering New York and Boston. Under the terms of the agreement, both airlines would coordinate flight schedules, sell seats on each other’s flights, codeshare flights and integrate each other’s loyalty program. In addition, the agreement allowed American Airlines to grow its international network while JetBlue could expand its domestic presence in New York and Boston.
Given the unprecedented nature of the agreement, both airlines agreed to several conditions outlined by the Trump Administration to ensure competition in the industry and consumers would not be harmed.
First, both agreed they would not withdraw, reduce, or degrade the number of flights “in response to the other’s competitive behavior.” Second, both agreed to permanent slot divestitures at New York’s John F. Kennedy International and Washington’s Reagan National Airport, with further divestiture possible in the future. Finally, American and Jet Blue also agreed they would not discuss “future fares, fare levels, or revenue strategies” at Northeast Alliance airports and would not discuss “scheduling or capacity decisions” on routes outside the agreement. These measures were ultimately designed to ensure the agreement did not harm consumers or competition in the airline industry.
Despite the Administration’s agreement for both airlines rolling out the agreement, the Department of Justice announced in September 2021 that they would sue to block the alliance. The Department of Justice argued that “the Northeast Alliance will cause hundreds of millions of dollars in harm to air passengers across the country through higher fares and reduced choice.”
In response to the lawsuit, American Airlines asked the U.S. District Court of the District of Massachusetts to dismiss the case on the grounds the agreement “has been underway for nine months, yet plaintiffs do not allege that it has caused a single higher price, any reduction in quality or the slightest reduction in output.”
The Department of Justice has failed to acknowledge that the Northeast Alliance has allowed both airlines to expand their services, allowing consumers to fly directly to more places both domestically and overseas.
As a result of the Northeast Alliance, Jet Blue has been able to announce 32 new routes “fully enabled by access to American’s slot portfolio and feed from their Customer base.” Additionally, American also announced new domestic services from Boston and New York and direct flights to New Delhi, Tel Aviv, and Athens. Thus, as a direct result of the Northeast Alliance, both airlines have been able to provide passengers “more flights” and “more destinations.”
One of the principal benefits of the Northeast Alliance is that it has spurred competition in the Northeast region rather than depressed it. For example, in May 2021, Delta Airlines announced it would compete with American and Jet Blue on four routes from Boston and New York that were just served by American Airlines.
In June 2021, Spirit Airlines also announced it would begin service to Manchester, New Hampshire from Orlando, Fort Myers, Tampa, and Fort Lauderdale. Manchester airport is located just 50 miles from Boston, meaning Spirit will be directly competing for Jet Blue and American’s passengers traveling out of Boston.
When considering the case against the Northeast Alliance Agreement, federal courts should also take into account the significant benefits brought to passengers in the Northeastern United States and across the country. Not only has the agreement resulted in more routes out of New York and Boston, it has also boosted competition. Therefore, rather than allowing this potentially damaging case to continue, the courts must allow the Northeast Alliance to stand.
If they don’t, more passengers will be left at the gate.