JetBlue won’t appeal ruling that blocks American Airlines partnership
Washington Post
JetBlue Airways announced Wednesday it won’t appeal a judge’s decision to dismantle a partnership with American Airlines that allowed the two carriers to coordinate operations on certain routes in the Northeast and share the profits.
The carrier said it hopes its move to end the Northeast Alliance would prompt the Justice Department to reconsider its opposition to JetBlue’s bid to merge with Spirit Airlines.
“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,” the carrier said in a statement.
American Airlines said that although it respected JetBlue’s decision, it would still pursue an appeal in the Northeast Alliance case.
“JetBlue’s decision and reasoning confirm our belief that the NEA has been highly pro-competitive and that an erroneous judicial decision disregarding the NEA’s consumer benefits has led to an anticompetitive outcome,” the carrier said.
American and JetBlue announced the creation of the Northeast Alliance in July 2020. The Transportation Department gave the carriers approval to form the alliance in the waning days of the Trump administration as long as certain conditions were met. The Justice Department challenged the agreement in 2021 and the case was heard last fall in U.S. District Court in Massachusetts.
A federal judge in Boston ruled in May that the alliance diminished competition and ordered the partnership be dissolved.
Judge Leo T. Sorokin’s 94-page decision came two months after the Justice Department moved to block JetBlue’s attempt to merge with Spirit, saying the deal would reduce competition and could lead to higher fares.
Department attorneys said the loss of Spirit would be particularly harmful for price-sensitive consumers who depend on Spirit’s low fares.
In an interview, Robin Hayes, JetBlue’s chief executive, pushed back on the notion that the merger would mean less competition in an industry where four airlines account for about 80% of the market.
Hayes said combining operations would create an airline that can be “a disruptive presence able to appeal to a broader set of customers.” He added: “We’re doing this to grow. We’re not doing this to consolidate. We’re doing this to try and get bigger so we can better compete with the big four airlines.”
A combined JetBlue-Spirit airline would be the nation’s fifth-largest carrier.
Given its decision not to pursue an appeal in the Northeast Alliance case, JetBlue on Wednesday urged the Justice Department to take another look at its $3.8 billion merger with Spirit, noting that department has recognized “the benefits of JetBlue’s disruptive impact on the industry.”
“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,” JetBlue said. “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 Justice Department declined to comment on the matter.
However, Bill Baer, who led the Justice Department’s antitrust division from 2013 to 2016, said that JetBlue’s decision is unlikely to hold much sway with regulators.
“With an adverse decision on the Northeast Alliance weighing down their prospects to buy Spirit, (JetBlue) made a cynical but strategically reasonable choice,” said Baer, now a visiting fellow in governance studies at the Brookings Institution. “I’m pretty confident that this will not do anything to change the strict scrutiny the antitrust division is applying to the Spirit transaction.”
American’s decision to move forward with an appeal without JetBlue is less about preserving the Northeast Alliance than it is about keeping elements of the partnership that were beneficial to its operations, Baer said.
“The longer American can stay in this anti-competitive, as found by the courts, alliance, the more profitable it is for them, so why not?” Baer said.
Under the Biden administration, there has been increased scrutiny of deals in industries where it thinks there is too little competition to the detriment of consumers. The Justice Department’s victory in the Northeast Alliance case was seen as a huge boost to that effort.
JetBlue has taken other steps to allay regulators’ concerns about overlaps in service between the two carriers in the Northeast. Hayes previously pledged to divest Spirit’s holdings in Boston and New York and said it would offer five gates and “related assets at Fort Lauderdale” – a Spirit hub – to be allocated to other ultra-low-cost carriers. Hayes also said concerns about a loss of seats could be addressed by operating more frequent flights and from growth that would occur as part of the merger.