The Northeast Alliance expires with JetBlue Airways and American Airlines, as JetBlue Airways is hoping to clear any political and legal impediments towards its acquisition of Spirit Airlines — especially with the Department of Justice of the United States.
Northeast Alliance Expires With JetBlue Airways and American Airlines
The following press release was publicly issued from JetBlue Airways earlier today, Wednesday, July 5, 2023:
JetBlue’s unique model has successfully disrupted the industry for well over 20 years, and we decided to enter into the NEA as a creative solution to bring more of the JetBlue Effect to customers in New York and Boston, where our growth has been challenged by constraints outside of our control. By all measures, it succeeded. As a direct result of the NEA, customers benefitted from more of JetBlue’s low-fare, high-quality service than ever. We’ve increased capacity, added new routes and destinations, brought down fares, provided JetBlue-American flight connections that are a real alternative to Delta and United, and expanded the value of our loyalty program benefits to customers.
For these reasons, we strongly disagree with the court’s ruling against the NEA and stand behind the procompetitive impact of the alliance.
Despite our deep conviction in the procompetitive benefits of the NEA, after much consideration, JetBlue has made the difficult decision not to appeal the court’s determination that the NEA cannot continue as currently crafted, and has instead initiated the termination of the NEA, beginning a wind down process that will take place over the coming months. We will now turn even more focus to our proposed combination with Spirit, which is the best and most effective opportunity to truly transform the competitive landscape in the U.S. and bring the JetBlue Effect to more routes and markets across the country.
As it relates to the Spirit combination, terminating the NEA renders the U.S. Department of Justice’s (DOJ) concerns about our partnership with a legacy carrier entirely moot. With that, the DOJ should reconsider and support our plan to bring a national low-fare competitor to the Big Four; the flying public deserves better than the status quo. The DOJ itself has acknowledged the benefits of JetBlue’s disruptive impact on the industry, and we are open to working with the DOJ to address any remaining concerns they have.
The NEA is a complex partnership with many thousands of customers who have already booked travel in the months ahead. For customers, it’s important to note that nothing will change immediately and they can feel confident in new and existing bookings for the coming months. In addition, customers can continue to earn/redeem points and receive reciprocal loyalty benefits. We will continue to work through the legal process to achieve a wind down plan that protects consumers, and look forward to presenting our view to the court in the coming weeks. The DOJ’s proposal is too onerous and overreaching, ignoring arguments the DOJ itself presented at trial about the benefits of similar aspects of other domestic carrier partnerships.
With strong momentum, a clear organic plan, and the procompetitive Spirit combination on the horizon, we are ready to be a force for good in the industry on a more national scale and look forward to advancing our planned combination with Spirit.
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.
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.
Acquisition of Spirit Airlines by JetBlue Airways Also in Jeopardy
However — along with the attorneys general of the Commonwealth of Massachusetts, the state of New York, and the District of Columbia — the Department of Justice of the United States filed a civil antitrust lawsuit on Tuesday, March 7, 2023 to block the proposed $3.8 billion acquisition of Spirit Airlines, Incorporated by JetBlue Airways Corporation, alleging that the low-cost, no-frills flying option of Spirit Airlines has resulted in lower fares and more options to routes across the country and allowing for more Americans — particularly price sensitive consumers who pay their own fares — to travel.
A definitive merger agreement between Frontier Group Holdings, Incorporated and Spirit Airlines, Incorporated — which are the respective parent companies of Frontier Airlines and Spirit Airlines — was announced on Monday, February 7, 2022; and it would have resulted in the creation of the fifth largest airline in the United States once the merger is completed. The agreement was not fulfilled because the board of directors at Spirit Airlines voted on terminating its merger with Frontier Airlines, as they apparently wanted what they considered to be a superior offer from JetBlue Airways.
In a surprise move on Tuesday, April 5, 2022, JetBlue Airways confirmed that a proposal has been submitted to the board of directors of Spirit Airlines with the intent to acquire the airline for $33.00 per share in cash, which implies a fully diluted equity value of $3.6 billion and providing full and certain value to the shareholders of Spirit Airlines.
Final Boarding Call
Is JetBlue Airways “doubling down on consolidation, seeking to acquire and eliminate its main ultra-low-cost competitor, depriving travelers of yet another choice”? Perhaps. Is the airline engaging in what may be considered questionable business practices? That is debatable.
I had always had 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…
…but now that JetBlue Airways has voluntarily decided not to appeal the ruling against the Northeast Alliance, we will never know the full effect on consumers — whether positive or negative.
All photographs ©2018, ©2021, and ©2022 by Brian Cohen.
