Feds, states sue to stop deal between American Airlines and JetBlue

The Justice Department and officials in six states have filed a lawsuit to block a partnership formed by American Airlines and JetBlue, claiming that it will reduce competition and lead to higher fares.

The Justice Department said Tuesday that the agreement will eliminate important competition in New York and Boston and reduce JetBlue’s incentive to compete against American in other parts of the country.

Attorney General Merrick Garland said the lawsuit was about ensuring fair competition that lets Americans fly at affordable prices.

“In an industry where just four airlines control more than 80% of domestic air travel, American Airlines’ ‘alliance’ with JetBlue is, in fact, an unprecedented maneuver to further consolidate the industry,” Garland said in a statement. “It would result in higher fares, fewer choices, and lower quality service if allowed to continue.”

American and JetBlue vowed to fight the lawsuit and to continue their alliance unless a court orders them to stop.

American and JetBlue announced their deal last year and have already started to coordinate flights in the Northeast. They argue that it is a pro-consumer arrangement that has already helped them start 58 new routes from four airports in New York and Boston, add flights on other routes, and plan new international destinations.

American CEO Doug Parker said that blocking the deal will “take away consumer choice and inhibit competition, not encourage it. This is not a merger: American and JetBlue are–and will remain–independent airlines.”

The lawsuit comes two months after President Joe Biden issued an executive order calling on government agencies to help consumers by increasing competition in the airline industry and other parts of the economy.

The Transportation Department approved the agreement, with certain conditions, in January during the final days of the Trump administration. The airlines gave up some takeoff and landing slots at John F. Kennedy International Airport in New York and Washington Reagan National Airport outside Washington, and they agreed not to cooperate on setting prices.

“Instead of suing now, the (Justice Department) should have waited and monitored and held us accountable to the benefits that we said this would deliver,” JetBlue CEO Robin Hayes said in an interview.

Hayes disputed the Justice Department’s belief that the deal will stop his airline from competing against American outside the Northeast. He noted that JetBlue this year started flying from New York to London and between Miami and Los Angeles, important routes for American.

Despite the green light from the Transportation Department, antitrust lawyers at the Justice Department began examining the deal more closely this spring and requested interviews and documents from the airlines, according to an airline lawyer involved in the case.

In the last three weeks it became apparent that the Justice Department was likely to file a lawsuit, said the attorney, who spoke on condition of anonymity because discussions with the regulators were private.

The airlines call their partnership the Northeast Alliance or NEA. It lets American and JetBlue sell seats on each other’s flights and give customers reciprocal benefits in the separate frequent-flyer programs.

American and JetBlue argue that the deal is pro-consumer by making their combination a stronger competitor in the Northeast. Together, the airlines say, they controlled 16% of the region’s air-travel market before the partnership, and that has grown to 24%.

The airlines argue that the Justice Department has no evidence that their agreement is leading to higher fares. Air-travel prices have been hurt by the pandemic, which continues to cut into travel demand and push fares lower.

American and JetBlue argue that nothing in their deal controls pricing, and that each airline will continue to set its own fares.

Southwest Airlines and Spirit Airlines filed formal complaints against the American-JetBlue alliance, however, arguing that—along with a similar deal on the West Coast between American and Alaska Airlines—it will make American too big.

The Justice Department lawsuit was filed in federal district court in Massachusetts. The department was joined by the attorneys general of California, Massachusetts, Florida, Pennsylvania, Virginia, Arizona and the District of Columbia.