DALLAS (AP) — The government’s antitrust case against American Airlines and JetBlue begins Tuesday, and the outcome could determine how…
DALLAS (AP) — The government’s antitrust case against American Airlines and JetBlue begins Tuesday, and the outcome could determine how closely the Biden administration examines other airline agreements, including JetBlue’s pending bid to buy Spirit Airlines.
The Justice Department and six states are suing American and JetBlue to break their partnership in the Northeast, namely New York and Boston.
It is an important test of government opposition to mergers, even though the partnership between American and JetBlue is not a full-blown merger. The government says the alliance will reduce competition and lead to higher tariffs.
The Trump administration approved the alliance, but the Justice Department began investigating further shortly after President Joe Biden took office.
American and JetBlue will state that the partnership has been in place for about 18 months and that any airline can offer new routes that are not economical in themselves. They say there is no evidence that the deal is harming consumers.
Current and former airline CEOs are among the possible witnesses identified by airline prosecutors and attorneys. Delta Air Lines is trying to avoid calling two of its most senior executives to testify as they are too busy in Atlanta to attend the Boston federal court trial.
U.S. District Court Judge Leo Sorokin has allotted nearly three weeks for the trial. There will be no jury. It could take weeks or even months for Sorokin to make a decision, which the losing side is likely to appeal.
When the Justice Department filed a lawsuit a year ago, Attorney General Merrick Garland called the American-JetBlue alliance “an unprecedented maneuver” that would lead to higher fares, fewer choices and poor service for travelers.
The Justice Department’s top antitrust official, Assistant Attorney General Jonathan Kanter, echoed those arguments during a hearing last week before a Senate subcommittee. He said that while new airlines have joined over the years, leading to lower fares and better service, too many of them have been swallowed up by mergers and acquisitions.
“We remain committed to fighting airline concentration when it breaks the law,” Kanter told the senators. “We’re looking very carefully at our approach to airline consolidation … we have plenty of other things under review.”
Kanter didn’t say what those other things are, but a likely one could be JetBlue’s proposal to buy Spirit for $3.8 billion. Spirit CEO Ted Christie, who favored a merger with Frontier Airlines, fought against JetBlue for months, stating that antitrust regulators would never allow his low-cost carrier to be swallowed by JetBlue, a more conventional and more expensive airline.
Under the alliance, American and JetBlue will sell seats on each other’s flights and share revenues. They say they coordinate on schedules, but not on prices. And they offer customers mutual benefits in the frequent flyer programs.
American and JetBlue state that their alliance is not a merger and helps them compete with United and Delta in the Northeast. They say the alliance has allowed them to add 50 new routes, add flights on previous routes and increase their share of the Northeast market from 16% to 24%.
The carriers claim to be baffled by the Justice Department’s claims that the deal is anti-competitive.
“They’re wrong, and we’ll prove it,” Doug Parker, American’s then CEO, said around the time the lawsuit was filed. He said blocking the deal “would take away consumer choice and hinder, not encourage competition”.
The government says the alliance will further reduce competition between airlines and cost consumers hundreds of millions of dollars a year. JetBlue was once a “sloppy adversary” and America’s most thorny competitor in New York.
“But now JetBlue is sold out and cashed in,” state attorneys say in one filing.
The government says American and JetBlue together will hold more than 50% of the market — sometimes more than 80% — on routes out of New York and Boston, where they previously competed directly with each other.
The Justice Department appears to be expressing buyer remorse for many past airline mergers that have gone largely unchallenged. Those deals eliminated Continental, Northwest, US Airways, AirTran, TWA and other airlines, and led to the downgrading of once-bustling hub airports, including St. Louis, Cleveland and Pittsburgh.
Consumer advocates say those mergers have resulted in higher prices and lower service, especially from the four largest airlines: American, Delta, United and Southwest.
“They are too big to fail and too big to care,” said Bill McGee of the American Economic Liberties Project. “We believe there should be a moratorium on all mergers in the airline industry until[federal regulators]go back and look at all the negative effects of all the consolidation.”
sen. Richard Blumenthal, D-Conn., said last week that a lack of competition caused the widespread flight problems that exacerbated travelers this summer.
“Americans are outraged by airline cancellations and delays, and they are beginning to understand that the reason why airlines treat them badly and why they are poorly managed is because of consolidation,” he said.
The case is 21-11558 in Massachusetts court. In addition to the federal government, other claimants include the states of Arizona, California, Florida, Massachusetts, Pennsylvania, Virginia, and the District of Columbia.
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