Enterprise

US case against American Airlines and JetBlue in court

DALLAS (AP) — The government’s antitrust lawsuit against American Airlines and JetBlue begins Tuesday and the outcome could determine how well the Biden administration reviews other airline deals, including JetBlue’s ongoing bid to buy Spirit Airlines.

The Justice Department and six states — including Pennsylvania — are suing American and JetBlue for severing their partnership in the Northeast, namely New York and Boston.

It’s a significant test of the administration’s opposition to mergers — even if the U.S.-JetBlue partnership isn’t a full merger. The government argues that the alliance will reduce competition and lead to higher tariffs.

The Trump administration approved the alliance, but the Justice Department began taking a closer look soon after President Joe Biden took office.

American and JetBlue will argue that the partnership has already been in effect for about 18 months and has allowed each airline to offer new routes that would not be economical for either. They say there is no evidence the deal is harming consumers.

No jury

Current and former CEOs of American and the CEO of JetBlue, as well as senior officials from other airlines, are among the potential witnesses identified by both sides. Delta Air Lines tried to block two executives from testifying, saying they were too busy in Atlanta, where the airline is based, to attend the trial in federal court in Boston. The judge ruled on Monday that one of them, a senior vice president, should be available to testify.

U.S. District Court Judge Leo Sorokin has scheduled nearly three weeks for the trial. There will be no jury. Sorokin could take weeks or even months to make a decision, which will likely be appealed by the losing side.

When the Justice Department filed a lawsuit a year ago, Attorney General Merrick Garland called the U.S.-JetBlue alliance an “unprecedented move” that would result in higher fares, less choice and poorer service. mediocre for travellers.

New airlines swallowed

The Justice Department’s top antitrust official, Assistant Attorney General Jonathan Kanter, echoed those arguments during a hearing last week before a Senate subcommittee. He said while new airlines have entered the market over the years, bringing lower fares and better service, too many have been swallowed up by mergers and acquisitions.

“We remain committed to fighting airline concentration where it breaks the law,” Kanter told senators. “We are reviewing our approach to airline consolidation very carefully…we have many other issues under consideration.”

Kanter didn’t say what those other issues are, but one of them could be JetBlue’s proposal to buy Spirit for $3.8 billion. Spirit CEO Ted Christie, who favored a merger with Frontier Airlines, fought JetBlue for months, arguing that antitrust regulators would never allow his low-cost airline to be swallowed up by JetBlue, a more conventional and expensive carrier. .

New routes

Under the alliance, American and JetBlue sell seats on each other’s flights and share the revenue. They say they coordinate on schedules but not on prices. And they offer customers reciprocal benefits in loyalty programs.

American and JetBlue argue their alliance is not a merger and helps them compete with United and Delta in the Northeast. They say the alliance has allowed them to add 50 new routes, add flights on previous routes and increase their market share in the North East from 16% to 24%.

The carriers claim to be baffled by claims by the Justice Department that the deal is anti-competitive.

“They’re wrong, and we’ll prove it,” Doug Parker, then-CEO of American, said around the time the lawsuit was filed. He said blocking the deal would “take away consumer choice and hinder competition, not encourage it”.

Federals: reduction of competition

The government argues that the alliance will further reduce competition between airlines and cost consumers hundreds of millions of dollars a year. JetBlue was once a “disjointed adversary” and the most irritating American competitor in New York.

“But now JetBlue has sold out and cashed in,” government lawyers say in a filing.

The government says that together American and JetBlue will control more than 50% of the market – sometimes more than 80% – on routes from New York and Boston where they previously competed.

The Justice Department appears to be expressing buyer’s remorse over numerous past airline mergers that have gone virtually unchallenged. These agreements eliminated Continental, Northwest, US Airways, AirTran, TWA and other airlines, and they led to the downgrading of once-bustling hub airports, including St. Louis, Cleveland and Pittsburgh.

Consumer advocates say the mergers have led to higher prices and lower service, especially from the four biggest airlines: American, Delta, United and Southwest.

“Too Big to Care”

“They’ve become too big to fail and too big to care,” said Bill McGee, an aviation expert at the American Economic Liberties Project, a group that opposes the concentration of power within industries. “We believe there should be a moratorium on all mergers in the airline industry until (federal regulators) come back and review all the negative effects of all consolidation.”

Sen. Richard Blumenthal, D-Conn., said last week that a lack of competition has caused the widespread flight issues that have plagued travelers this summer.

“Americans are beyond furious with airline cancellations and delays, and they’re starting to realize that the reason airlines are mistreating them and mishandling them is because of consolidation,” he said. he declares.

The case is filed in the US District Court in Massachusetts. Besides the federal government and Pennsylvania, the other plaintiffs are the states of Arizona, California, Florida, Massachusetts, Virginia and the District of Columbia.