U.S. Court Rules in Favor of Justice Department: American Airlines & JetBlue Airways End their Alliance

U.S. Court Rules in Favor of Justice Department: American Airlines & JetBlue Airways End their Alliance

The U.S. Federal Court while ruling in favor of Justice Department, ordered American Airlines and JetBlue Airways to end their partnership in the Northeast.

The U.S. District Judge Leo Sorokin said in his ruling, “It makes the two airlines’ partners, each having a substantial interest in the success of their joint and individual efforts, instead of vigorous, arms-length rivals regularly challenging each other in the marketplace of competition.”

The Justice Department had filed a lawsuit in September, 2021 to sought to undo the alliance arguing it was anti-competitive. The Department alleged that the airlines’ alliance was effectively a merger that would hurt consumers by driving up fares.

In their argument, American Airlines of Fort Worth, Texas, and JetBlue Airways of New York argued that the so-called ‘Northeast Alliance’ would provide them with a better chance of competing with other major carriers in the region, such as Delta Air Lines and United Airlines, within the congested airports.

However, Judge Sorokin was of the view, “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…. Such a pact is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent.”

The judge ordered the airlines to end the partnership 30 days after the ruling.

JetBlue and American were not allowed to coordinate fares under the partnership, which was approved in the in 2021 and has since expanded.

JetBlue had previously warned in a securities filing that a ruling against the NEA ‘could have an adverse impact on our business, financial condition, and results of operations.’

The Company urged, “Additionally, we are incurring costs associated with implementing operational and marketing elements of the NEA, which would not be recoverable if we were required to unwind all or a portion of the NEA.”

A separate antitrust lawsuit was filed by the department earlier in March this year seeking to block JetBlue's proposed acquisition of budget airline Spirit Airlines, arguing that the deal would result in higher fares, causing damages most acutely to cost-conscious passengers.

The combination faced a high hurdle in the approval process, due to the aggressive stance of the government taken against the deal as it viewed as anti-competitive in nature.