American Airlines Goes To Court, Tries To Overturn Breakup Of JetBlue Partnership – View from the Wing

American Airlines Goes To Court, Tries To Overturn Breakup Of JetBlue Partnership

by Gary Leff on June 3, 2024

American Airlines is still appealing the government’s win in its anti-trust suit against the Northeast Alliance between it and JetBlue – even though JetBlue abandoned the effort and moved on.

If JetBlue’s abandonment wasn’t ultimately because of a government ruling (if American prevails) it may owe a breakup fee for walking away from the partnership. But crucially the judge’s ruling against the arrangement didn’t just require them

The American Airlines – JetBlue partnership was pro-competitive. While the government claims “competition [between American and JetBlue] was directly benefiting consumers, and it’s all been wiped out” that makes absolutely no sense.

• The number of slots at New York JFK and LaGuardia are fixed. Regardless of the number of airlines in the market, and both American and JetBlue were among smaller players, the partnership did not reduce the number of flights. It may have shifted who flew which flights, but the total number of flights were the same.
• The partnership increased the supply of seats in the market which tends to lower prices. American and JetBlue had to give up slots to get Trump administration’s approval for the deal and would have had to give up more slots if they did not increase seat capacity. The two airlines accomplished that through increase of gauge. In other words, bigger planes. While the number of slots are fixed, this deal meant more seats per slot. Without the deal, you get fewer seats and higher prices.
• American and JetBlue partnering was good for consumers. It created a third viable competitor in New York. Customers benefited, from mileage accrual and redemption to reciprocal elite benefits. That meant AAdvantage status members getting extra legroom seats and bags free on JetBlue (and vice versa). The government took that away.

Traditional anti-trust law looks at consumer benefit or harm. The district judge ruled that the partnership was per se illegal because it allowed the two airlines to coordinate who flew which routes. His ruling acknowledged growth in New York as a result of the NEA and also that “American’s slots at JFK and LaGuardia have been used more heavily and efficiently” as a result of the NEA. Both are good for consumers!

The judge’s ruling didn’t just shift from a consumer benefit standard, dismissing benefits to frequent flyers as ‘not the majority’ and dismissing capacity increases as ‘not on every route’, it also imposed prior restraints on future partnerships. American has to go to the government first because doing a similar deal for 10 years. They want to overturn this, even if their partnership with JetBlue is dead.

Meanwhile, the government also blocked JetBlue’s acquisition of Spirit Airlines – which they really only needed in order to grow with their American Airlines deal, and which they prioritized over keeping their American partnership. And now they’re in search of a strategy.

The Northeast Alliance really was the best plan for marketplace relevance for both American and JetBlue, for the customers of both airlines, and even for customers of United and Delta in the Northeast who would have benefited from their carriers facing a more vibrant competitor. Instead, we’ve seen American mostly ignore the Northeast in favor of the Sunbelt and JetBlue cutting flights as it tries to stem losses. Sometimes the reduction in competition after an anti-trust ruling is literally apparent, as it’s been in the case of the Northeast Alliance.

(HT: @crucker)

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