Antitrust Case Could Cause Turbulence for Consumers

In 2020, JetBlue and American Airlines announced the creation of a strategic partnership in the Northeast of the United States. The partnership, dubbed the Northeast Alliance (NEA), intended to create seamless connectivity for travelers in the Northeast and more choice for customers across their complimentary domestic and international networks.” Under the terms of the deal, American and JetBlue would “coordinate schedules” and offer “joint ticketing and reciprocal loyalty benefits.” To appease federal regulators, both airlines agreed to divest slots at major hubs to competitors and promised not to coordinate fares outside the Northeast.

Despite the Department of Transportation greenlighting the deal, antitrust enforcers at the Department of Justice are attempting to undo the deal, citing their belief that the alliance would “eliminate important competition in these cities, and harm air travelers across the country by significantly diminishing JetBlue’s incentive to compete with American elsewhere, further consolidating an already highly concentrated industry.”

Despite American Airlines asking the U.S. District Court of the District of Massachusetts to dismiss the case on the grounds that 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,” Judge Leo T. Sorokin denied the request.

The DoJ’s desire to undo the alliance stems from voiced arguments that the agreement has created “a duopoly in Boston and at New York JFK and LaGuardia airports” and criticism from senators who have urged antitrust enforcers to unwind the deal.

While the DoJ’s lawsuit to undo the Northeast alliance reflects increased push in antitrust enforcement, myopic actions could inflict actual harm on American consumers, forcing them to pay higher fares, reduced service, and ultimately less competition. In seeking to protect consumers, the DoJ could be about to imperil them if successful in the courts.

In bringing the antitrust case against American and JetBlue, the DoJ has failed to demonstrate any consumer harm as a result of the Northeast Alliance. Rather than showing that the agreement raised prices or saw a reduction in available flights, the DoJ based its case on the assumption that American Airlines sought to “dampen JetBlue’s incentive to continue to compete with its much larger partner.” As noted by both airlines, “the DOJ has presented no evidence the alliance has harmed consumers.”

Arguably the main win for consumers in the Northeast Alliance is that it has spawned competition at the nation’s largest airports, lowering prices for consumers. Shortly after JetBlue and American announced their deal, Delta, Spirit, and United announced major expansions in New York and Boston, resulting in increased competition and lower fares for consumers.  Without such a catalyst, these expansions would likely not have occurred, leaving consumers with less competition and higher fares.

The Northeast Alliance has also allowed JetBlue and American Airlines to offer services to more cities in both the United States and abroad. Through coordinating schedules and code sharing, 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.

Unwinding the Northeast Alliance would undoubtedly mean American Airlines and JetBlue have to reverse these offerings, meaning consumers are left with fewer destinations and possibly higher prices. As the lawsuit against American Airlines and JetBlue moves through the federal courts, judges should recognize the substantial benefit the Northeast Alliance has brought to consumers. Not only has the agreement resulted in more routes out of New York and Boston, it has also boosted competition, allowing passengers the opportunity to fly to more places.

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