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HomeTravel 2023Why JetBlue and American Airlines Were Ordered to End Pact

Why JetBlue and American Airlines Were Ordered to End Pact

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Almost three years after JetBlue Airways and American Airlines first created a strategic partnership that gave their customers mutual access to earning and redeeming miles, to reciprocal codeshare flights, and to an expanded route network, a federal judge has ruled against the collaboration.

The union, which was announced in 2020 and went into effect in 2021, was almost immediately met with legal challenges when the U.S. Department of Justice sued to block it as anti-competitive in September 2021.

“In an industry where just four airlines control more than 80 percent of domestic air travel, American Airlines’ ‘alliance’ with JetBlue is, in fact, an unprecedented maneuver to further consolidate the industry,” Attorney General Merrick Garland said in a DOJ release about the 2021 lawsuit. Garland argued that the pact was likely to result in higher airfares, fewer choices, and a lower quality of service for travelers.

Judge Leo Sorokin of the U.S. District Court in Massachusetts on Friday ruled in favor of the Justice Department’s position, writing in his order that “the two carriers essentially agreed to operate as one airline for most of their flights in and out of New York City and Boston.”

With the partnership, known as the Northeast Alliance (NEA), “American and JetBlue transformed themselves from competitors to collaborators, joining forces to create a single ‘optimized network,’” Sorokin wrote.

In a statement sent to AFAR, American Airlines said that it believes that the decision was “wrong” and noted that the airline is considering next steps.

“The court’s legal analysis is plainly incorrect and unprecedented for a joint venture like the Northeast Alliance. There was no evidence in the record of any consumer harm from the partnership, and there is no legal basis for inferring harm simply from the fact of collaboration. The Northeast Alliance has been a huge win for customers and anything but anti-competitive,” American told AFAR.

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AFAR reached out to JetBlue for comment and had not yet heard back as of press time.

The ruling “is great news for consumers,” Christopher Elliott, a consumer advocate and founder of Elliott Advocacy, tells AFAR. “American and JetBlue were not competing—this was a de facto merger—and the government correctly put an end to it. Passengers will benefit with lower fares and better service. The government needs to finish the job now by pulling the plug on the JetBlue–Spirit merger.”

American Airlines is part of the Oneworld alliance, which includes Alaska Airlines, British Airways, Cathay Pacific, Japan Airlines, and Qantas, and others. JetBlue did not join the Oneworld alliance under its agreement with American.

When JetBlue and American first unveiled their joint plan, they stated that, among other things, the move was designed to help the airlines recover from the effects of the pandemic and better compete in the Northeast, especially on flights out of New York and Boston, where there are four major airports: Boston Logan International Airport, LaGuardia Airport, John F. Kennedy International Airport, and Newark Liberty International Airport.

The May 19 court order contends that American Airlines is the largest airline in the world, and that JetBlue is the sixth-largest airline in the United States. Nearly 75 percent of JetBlue’s overall operations are flights into or out of the Northeast, Judge Sorokin cited, adding that American is the third-largest carrier operating in Boston.

Prior to the partnership, “in both locations, the defendants vigorously competed on everything from fares to the features they offered customers,” the judge wrote. “Though the defendants claim their bigger-is-better collaboration will benefit the flying public, they produced minimal objectively credible proof to support that claim. Whatever the benefits to American and JetBlue of becoming more powerful—in the Northeast generally or in their shared rivalry with Delta—such benefits arise from a naked agreement not to compete with one another.”

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It’s not yet clear whether the airlines will appeal, but Judge Sorokin ruled that within 30 days of the May 19 order the airlines are “restrained from further implementing the Northeast Alliance.”

If the airlines are forced to uncouple, some of the mutual access that had been created for JetBlue and American customers will fall by the wayside. JetBlue and American operate reciprocal codeshare flights, which means that members of JetBlue’s TrueBlue loyalty program can garner points on American flights and that American’s AAdvantage loyalty program members can do the same on JetBlue flights. Codesharing also allows customers to book flights with both airlines through a single booking.

Earlier this year, the Justice Department also sued to block JetBlue’s proposed acquisition of Spirit Airlines, arguing that it, too, would violate antitrust laws. Last spring, JetBlue put in a surprise bid to purchase low-cost carrier Spirit Airlines for $3.8 billion and in the fall, shareholders voted to accept the JetBlue buyout.

The lawsuit, which the Department of Justice filed in the District of Massachusetts in early March, claims that Spirit offers travelers lower fares and more options. “As our complaint alleges, the merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly,” stated Attorney General Garland.

The Justice Department argues that the Spirit acquisition will make it easier for other U.S. airlines to “coordinate to charge travelers higher fares or limit capacity,” and that through the bid JetBlue is “seeking to acquire and eliminate its main ultra-low-cost competitor, depriving travelers of yet another choice.”

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