The Department of Justice of the United States — along with attorneys general in Arizona, California, Florida, Massachusetts, Pennsylvania, Virginia, and the District of Columbia — filed a lawsuit in the District of Massachusetts on Tuesday, September 21, 2021 to block an unprecedented series of agreements between American Airlines and JetBlue Airways through which the two airlines will consolidate their operations in Boston and New York into what has been called the Northeast Alliance.
Department of Justice Sues to Block Northeast Alliance Partnership Between American Airlines and JetBlue Airways
“The civil antitrust complaint alleges that this extensive combination will not only eliminate important competition in these cities, but will also harm air travelers across the country by significantly diminishing JetBlue’s incentive to compete with American elsewhere, further consolidating an already highly concentrated industry”, according to this official press release from the Department of Justice of the United States. The “Northeast Alliance will cause hundreds of millions of dollars in harm to air passengers across the country through higher fares and reduced choice. The complaint alleges that prior to entering the Northeast Alliance, JetBlue and American both planned to compete more intensely with one another, including in Boston and New York City, but also in other areas. If allowed to proceed, the Northeast Alliance would eliminate this important existing and future competition — creating, as American’s senior executives put it, “further domestic consolidation.” The Northeast Alliance will dampen American’s incentive to expand service elsewhere in its network and will significantly reduce JetBlue’s incentives to challenge its much larger partner across the country.”
The strategic partnership between JetBlue Airways Corporation and American Airlines Group Incorporated was first announced on Thursday, July 16, 2020 and has been touted by both companies to create seamless connectivity for travelers in the northeastern United States — as well as bring a greater number of choices and options for customers across complementary domestic and international networks.
Key components and details of the Northeast Alliance were revealed on Wednesday, January 13, 2021; codesharing of flights between the two airlines was launched in February of 2021; and a reciprocity agreement with which “American’s AAdvantage members and JetBlue’s TrueBlue members can earn miles or points, traveling on either carrier” was formally introduced on Wednesday, May 26, 2021.
“American is the largest airline in the world”, according to the aforementioned press release. “Just four airlines — American, along with Delta, United and Southwest — collectively control over 80% of domestic air travel. According to the complaint, American has relentlessly pursued a strategy of industry consolidation in the United States and around the world. Unable to combine with foreign airlines through formal mergers, American has instead pursued consolidation through a series of international joint ventures. The complaint alleges that JetBlue’s CEO stated, ‘it may look as if a dozen or more airlines [are] providing service. But when you go under the surface, it’s really just three big mega-alliances controlling 87% of the traffic…Consumers effectively have very little choice in markets where JVs have a stranglehold — and they also face higher fares.’ The Justice Department alleges that American now seeks to import this strategy to domestic air travel.”
The Northeast Alliance has been called “an unprecedented maneuver to further consolidate the industry” which “would eliminate significant competition in this important industry” and “would result in higher fares, fewer choices, and lower quality service if allowed to continue.” It even prompted Richard A. Powers — who is the current acting assistant attorney general of the Antitrust Division of the Department of Justice of the United States — to allege that the partnership will have an impact on consumers extending far beyond Massachusetts and New York” which essentially “amounts to a de facto merger between American and JetBlue in Boston and New York City.”
The Northeast Alliance combines the operations of American Airlines and JetBlue Airways at four major airports which serve the greater metropolitan areas of Boston and New York. The two airlines have committed to coordinate “on all aspects” of network planning — including on which routes to fly, at when to fly them, who will fly them, and what size airplanes to use for each flight.
Furthermore, American Airlines and JetBlue Airways will also share revenues earned at these four major airports, which will purportedly eliminate their incentives to compete with one another. The Northeast Alliance will also allow the parties to pool their gates and takeoff and landing authorizations, which are known as “slots.”
This unprecedented combination would raise prices and reduce choices for air passengers traveling to and from Boston and New York, according to the aforementioned press release.
Final Boarding Call
“AAdvantage is now the only loyalty program that allows elite status earning opportunities when flying across three U.S. carriers — American, Alaska Airlines and JetBlue”, according to this official press release from American Airlines.
I have mixed thoughts about this alliance. I have always advocated that travel should be as easy and as streamlined as possible for consumers from start to finish; but at the same time, not at the significant expense of passengers who would ultimately wind up with fewer choices at more expensive prices, in my opinion.
After a lengthy investigation — as well as months of discussions with both American Airlines and JetBlue Airways which failed to narrow the disagreements between both sides — the Department of Justice of the United States claims that this lawsuit is an example of its commitment “to ensuring economic opportunity and fairness by protecting consumers and competition.” Do you agree that this statement is the case pertaining to the Northeast Alliance between American Airways and JetBlue Airways?
In other words, do you believe that the Northeast Alliance should be permitted to move forward — or is this really a bad deal for consumers as disguised by euphemistic marketing by two airlines who seek to dominate a part of the northeastern United States with flights?
All photographs ©2015, ©2018, and ©2019 by Brian Cohen.
