American and JetBlue executives have argued that the Justice Department's suit against their alliance is, simply put, "wrong." Now, they've made good on that opposition and have asked a district court to dismiss the lawsuit. Will the judge agree?
American Airlines and JetBlue Airways want a court to throw out the U.S. Justice Department’s suit against their Northeast Alliance. Their request makes good on months of statements arguing that the regulator’s claims have little merit, and that the alliance will bring more — not less — competition to travelers in the northeastern U.S.
The carriers argued that the DOJ failed to demonstrate actual harm to consumers from the alliance, and show that American and JetBlue together have “market power” — or the ability to raise prices by restricting capacity — in their motion to dismiss filed with the U.S. District Court for the District of Massachusetts on Monday. They characterized the claims as “defective.”
“We’re going full speed ahead in expanding, as we should. That’s the entire point: That this is good for consumers,” American CEO Doug Parker said on the alliance at the Skift Aviation Forum on November 17. He added that the airline would “prove them wrong,” referring to the DOJ, if the regulator continued to pursue its suit.
The DOJ alleged in its suit filed in September that the alliance allowed American and JetBlue to “effectively merge their operations” in Boston and New York, the two largest airline markets in the northeast and among the largest in the U.S. The regulator claimed that the pact would cost consumers “hundreds of millions of dollars in harm,” and likened it to a “modern-day version of a nineteenth century business trust.”
While still early days for the alliance that launched earlier this year, the additional flight options promised by the airlines are beginning to show. In the first six months of 2022, American and JetBlue’s combined departure capacity from the four Boston and New York airports — Boston Logan, and New York JFK, LaGuardia, and Newark — is up 18.5 percent compared to 2019, according to Cirium schedules. Capacity is up at each individual airport as well, including a dramatic 85 percent year-over-three-year rise at Newark.
That added capacity is the result of dozens of new routes on JetBlue to places like Bogota from JFK, Kansas City from Boston, New Orleans from LaGuardia, and St. Lucia from Newark. And the growth is occurring even as American is retrenching from nearly 20 shorter routes from the four airports, including the LaGuardia-Boston shuttle route that it can trace back to the Eastern Air Shuttle in the 1960s. American has — or is — added new long-haul flying from JFK, including to Athens, Delhi, and Tel Aviv.
In addition to adding flights, American and JetBlue claim that their partnership is the only way to create a viable third competitor to Delta Air Lines and United Airlines in New York, and Delta in Boston. Delta and United each had a more than 23 percent share of New York seats compared to American and JetBlue’s combined 25 percent share in 2019, Cirium data show. While in Boston, Delta with a 19 percent share was the runner up to JetBlue’s 29 percent share the same year.
“Blocking the alliance would ultimately prove anti-competitive,” wrote MKM Partners Analyst Conor Cunningham in a September report on the suit. “The American and JetBlue alliance has been focused on growth in the Northeast which could not have been achieved without additional scale.”
Marty St. George, a longtime airline executive and the former commercial chief at JetBlue until 2019, tweeted in September that he agreed with Cunningham’s statement and added that neither American nor JetBlue “could compete with Delta alone.”
American and JetBlue are also blocked from coordinating pricing under the the agreement approved by the U.S. Department of Transportation in the waning days of the Trump administration. This is a limiting factor on their ability to collude.
And, as a condition to their alliance, the airlines must also divest at least seven slot pairs at JFK, and six pairs at Washington Reagan National airports. These divestitures have yet to occur pending the conclusion of the DOJ’s investigation and suit, however, carriers including Southwest Airlines and Spirit Airlines have expressed interest.
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Photo credit: American and JetBlue have asked a judge to dismiss the Department of Justice's suit against their alliance. Glenn Beltz / Flickr