Judge Orders AA, JetBlue to Terminate Northeast Alliance

A federal judge on Friday ordered American Airlines and
JetBlue to dissolve their Northeast Alliance partnership within 30 days, ruling
in favor of the U.S. Department of Justice in a lawsuit and deeming the
carriers’ three-year-old alliance anticompetitive.

Judge Leo Sorokin in the U.S. District Court of
Massachusetts ruled the carriers violated the Sherman Antitrust Act, which
governs competitive corporate conduct in the United States. 

“These two powerful carriers act as one entity in the
northeast, allocating markets between them and replacing full-throated
competition with broad cooperation,” Sorokin wrote in his ruling. “The
plaintiffs have convincingly established that this arrangement immediately and
substantially upsets the competitive balance in a highly concentrated industry.”

Six states and the District of Columbia joined the DOJ to
file the antitrust
suit in September 2021. The trial began in September 2022, with several
executives from both airlines taking the stand to defend the agreement.
Closing arguments were held in November.

The carriers announced the partnership in July
2020, combining their operations at Boston
and the three major New York area airports. In January 2023, JetBlue executives
said the alliance had
become profitable and in April 2023 would operate 290 combined alliance
flights at New York’s John F. Kennedy International Airport, 190 at LaGuardia
Airport and 220 at Boston’s Logan International Airport. 

The DOJ in filing the lawsuit against the carriers called
the alliance a “de facto merger,” and Sorokin agreed, highlighting in
his ruling what he called the anticompetitive nature of the partnership. 

“This is not a partnership between two autobody shops,
in a county with dozens of other autobody shops, where new mechanics could
enter and set up their own shops with relative ease,” he wrote. “This
is the alignment of two distinct and powerful competitors in a unique and congested
region. All other domestic carriers operating there can be counted using single
digits. American and JetBlue command at least a quarter of the market in the
northeast generally.”

Sorokin also dismissed the carriers claims of consumer
benefits, and suggested any benefits in terms of increased service and loyalty
program reciprocity could have been achieved through a looser alliance, like
the one formed in 2020 between American
and Alaska Airlines. 

Neither carrier immediately returned requests for comment.
The DOJ did not immediately issue a public reaction. American CEO Robert Isom
during a March presentation for investors said the carrier had “no
Plan B” if Sorokin were to rule against the alliance. 

DOJ is also suing
to block JetBlue’s announced merger
with Spirit Airlines in a separate case that Friday’s ruling does not affect.