American Airlines and JetBlue Lose Appeal in Antitrust Case Over Northeast Alliance

A U.S. appeals court on Friday held that a trial judge correctly found that American Airlines’ now-scrapped U.S. Northeast partnership with JetBlue Airways violated federal antitrust law. The U.S. appeals court rejected on the bid by American Airlines (AA) to overturn a judge’s decision that sided with the U.S. Department of Justice and declared that its now-scrapped U.S. Northeast partnership with JetBlue Airways was anticompetitive.

(Image Credit: aa)

Siding with the U.S. Department of Justice, the Boston-based 1st U.S. Circuit Court of Appeals affirmed a trial judge’s ruling denied the appeal denied by AA and blocking the airlines’ “Northeast Alliance,”. The AA and JetBlue deal which had allowed the two carriers to coordinate flights and pool revenue.

American Airlines and JetBlue appeal denied

U.S. Circuit Judge William Kayatta, writing for a three-judge panel, said the trial judge had been “presented with an arrangement that had many of the essential attributes of an agreement between two powerful competitors sharing revenues and divvying up highly concentrated markets.”

He said the judge, Leo Sorokin, following a non-jury trial had in May 2023 issued a ruling with “detailed findings of fact, many key ones of which were unfavorable to American,” and none of which were clearly wrongly legally analyzed.

AA loses case a victory of U.S.

U.S. Attorney General Merrick Garland in a statement called the ruling “a hard-won victory for the millions of Americans who count on competition between airlines to fly affordably, whether to visit family, to go on vacation, or to travel for business.”

American Airlines on the rejection of deal

Fort Worth, Texas-based American Airlines in a statement said it disagreed with the decision and was considering its options. It could either ask the 1st Circuit to reconsider the ruling or pursue an appeal at the U.S. Supreme Court.

“The Northeast Alliance was designed to increase competition and expand customer options in the Northeast, which it clearly did during the time it was allowed to operate,” American Airlines said.

Through their partnership, American, the nation’s largest airline, and JetBlue, the sixth-largest, joined forces for flights in and out of New York City and Boston, coordinating schedules and pooling revenue.

AA and JetBlue deal could hurt customers

The Justice Department argued that the alliance would hurt consumers, saying the partnership eliminated incentives for American to cut prices to lure customers from JetBlue, a historically disruptive rival with often lower fares.

Following Sorokin’s ruling, JetBlue terminated the alliance, as it unsuccessfully sought to bolster its efforts to win approval for the now-dropped $3.8-billion purchase of Spirit Airlines, which the Justice Department also challenged.

Through their partnership, American, the nation’s largest airline, and JetBlue, the sixth-largest, joined forces for flights in and out of New York City and Boston, coordinating schedules and pooling revenue.

American Airlines, though, pressed ahead with an appeal, saying the ruling would prevent the company from entering into any similar future arrangement for 10 years, including with JetBlue.

Airline industry’s antitrust concerns

American Airlines and JetBlue formed the NEA in 2020, effectively consolidating operations for most routes to and from New York City and Boston. Under this joint venture, the airlines coordinated schedules and pooled revenue, functioning as a single carrier in the region.

The U.S. Department of Justice (DOJ), supported by several states, challenged the agreement, arguing it diminished competition in an already concentrated market.

The appeals court’s decision reinforces restrictions on such arrangements, emphasizing antitrust concerns in the airline industry.

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