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DOJ wins lawsuit terminating JetBlue’s partnership with American Airlines Northeast

DOJ wins lawsuit terminating JetBlue’s partnership with American Airlines Northeast

An American Airlines plane takes off near a parked JetBlue plane at Fort Lauderdale-Hollywood International Airport July 16, 2020 in Fort Lauderdale, Florida.

Joe Raedle | Getty Images

A federal judge ruled on Friday American Airlines And JetBlue Airways to end their partnership in the Northeast, a victory for the Justice Department after it asked for the alliance to be dissolved on the grounds that it was anti-competitive.

The lawsuit, filed in September 2021, alleged that the airline alliance was a de facto merger that would harm consumers by driving up prices. The trial began a year later in Boston and ended in December.

“Today’s decision is a win for Americans who depend on competition between airlines to travel affordably,” US Attorney General Merrick Garland said in a statement. “The Justice Department will continue to protect competition and enforce our antitrust laws in the highly consolidated airline industry and across all industries.”

Both airlines expressed disappointment with the decision and said they are considering next steps.

“This results in the two airlines being partners, each having a significant interest in the success of their combined and individual efforts, rather than fierce, independent rivals regularly challenging one another in the competitive marketplace,” U.S. District Judge Leo Sorokin said in his ruling Verdict.

American Airlines, based in Fort Worth, Texas, and JetBlue Airways, based in New York, argued they needed the so-called Northeast Alliance to better compete with other major carriers Delta Air Lines and United Airlines at congested airports in the region.

“Whatever the benefits to American and JetBlue of growing more powerful — in the Northeast generally, or in their shared rivalry with Delta — such benefits come from a naked agreement not to compete with each other,” Sorokin wrote. “Such a pact is exactly the kind of ‘undue trade restriction’ that the Sherman Act was intended to prevent.”

He instructed the airlines to end the partnership 30 days after the ruling. The airlines are likely to appeal the decision. A JetBlue spokeswoman said the airline is reviewing the decision and reviewing next steps.

“We are disappointed with the decision,” a JetBlue spokeswoman said in a statement. “We made it clear during the negotiation that the Northeast Alliance was a great win for customers. The NEA has enabled JetBlue to grow significantly in the cramped airports of the Northeast, extending the airline’s low fares and great service to more routes than would otherwise have been possible.”

“The court’s legal analysis is clearly flawed and unprecedented for a joint venture like Northeast Alliance,” an American Airlines spokesman said in a statement. “There was no evidence on file that consumers were harmed by the partnership and there is no legal basis for inferring harm from the mere fact of cooperation.”

A withdrawal from the partnership would be difficult, especially during the peak summer travel season, for which airlines have already sold tickets.

JetBlue and American are not allowed to coordinate fares under the partnership, which was approved in the final days of the Trump administration in 2021 and has since expanded.

JetBlue previously warned in a securities statement that a judgment against the NEA “could have an adverse impact on our business, financial condition and results of operations.”

“In addition, we incur costs associated with implementing operational and marketing elements of the NEA that would not be recoverable if we had to wind down all or part of the NEA,” the company said.

The department separately filed an antitrust lawsuit in March to block JetBlue’s proposed acquisition of the low-cost carrier Spirit Airlinesargued the deal would drive up fares and “hurt cost-conscious passengers the most.”

That combination faces a high hurdle for approval from the Biden administration, which has vowed to take a hard line against what it considers anti-competitive agreements.

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