Government Sues over “Alliance” Between American Airlines and JetBlue Airways


The Department of Justice and the attorneys general of six states have, together, filed an action challenging American Airlines’s “Northeast Alliance Agreement” with its purported rival, JetBlue Airways.  American is the largest of four airlines that collectively control over 80 percent of domestic air travel.  JetBlue, on the other hand, is a “uniquely disruptive low-cost airline” that has successfully challenged the major airlines over the past 20 years through lower fares and better service.  Its low costs have also forced the major airlines to decrease their prices, saving travelers billions of dollars—the so-called “JetBlue Effect.”  The DOJ alleges that the two companies’ alliance puts an end to JetBlue’s fierce competition in the Northeast. 

Under the Northeast Alliance Agreement, the two airlines pool revenue and coordinate on “all aspects” of network planning at Boston Logan International Airport, JFK International Airport, La Guardia Airport, and Newark Liberty International Airport.  The explicit goal of the agreement, the DOJ alleges, was to “make each carrier indifferent about whether a passenger chooses American or JetBlue for a particular flight to or from one of the four airports.”  Their agreement, the DOJ claims, discourages competition on price between the two companies and operates as a de facto merger, eliminating competition between American and JetBlue’s 11 overlapping domestic flights to and from Boston and 17 overlapping domestic flights to and from New York.  The DOJ seeks a finding that the Northeast Alliance violates Section 1 of the Sherman Act as well as a permanent injunction prohibiting the airlines from further concerted conduct. 

Both companies vigorously contest the allegations.  American asserts that, “This is not a merger: American and JetBlue are—and will remain—independent airlines.”  It claims that the Northeast Alliance “has brought new services to customers” and “increased frequencies” of routes.  JetBlue similarly contends that the agreement will, and already is, benefitting consumers by allowing American and JetBlue to compete with Delta Airlines and United Airlines.  JetBlue was especially frustrated by the DOJ’s action because the Department of Transportation had, subject to some minor changes, approved of the agreement in in the final days of the previous administration.

The case is U.S. v. American Airlines Group Inc., No. 21-cv-11558, in the District of Massachusetts
 

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About Raymond N. Barto

Raymond N. Barto is a senior associate in Faruqi & Faruqi’s New York office. He focuses his practice on antitrust litigation.

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