American Airlines and JetBlue must end their alliance, a federal judge said on Friday, ruling that the partnership weakens competition and hurts consumers in the Northeast by reducing their flight options.
The decision is a blow for the airlines, which have said their codeshare agreement helps consumers by creating a stronger competitor in the region for Delta Air Lines and United Airlines.
American and JetBlue announced in 2020 that they would cooperate on some routes in the Northeast in a deal they called the Northeast Alliance. They argued it was a pro-consumer arrangement that allowed them to start 58 new routes from four airports in New York and Boston, add flights on other routes and plan new international destinations.
The partnership went into effect in early 2021 in the last days of the Trump administration. The deal lets American and JetBlue coordinate schedules and share revenue on many routes to and from New York and Boston.
However, the Department of Justice, joined by six states and the District of Columbia, sued in 2021 to block the alliance, arguing that American and JetBlue are too dominant in the airline industry and that the alliance would drive up prices for flyers. An economist arguing for the Justice Department predicted that consumers would spend roughly $700 million more a year if American and JetBlue stopped competing with each other in the Northeast, according to the Associated Press.
“It is a very important case to us … because of those families that need to travel and want affordable tickets and good service,” Justice Department lawyer Bill Jones said during closing arguments, the AP reported.
In a statement, JetBlue said it was “disappointed in the decision” and claimed the deal was “a huge win for consumers.”
“Through the NEA, JetBlue has been able to significantly grow in constrained northeast airports, bringing the airline’s low fares and great service to more routes than would have been possible otherwise,” the company said. “We are studying the judgment in full and evaluating our next steps as part of the legal process.”
“Unreasonable restraint on trade”
On Friday, Leo Sorokin, a federal judge based in Boston, sided with the government, writing that the airlines presented little evidence that their partnership would benefit consumers.
“Though the defendants claim their bigger-is-better collaboration will benefit the flying public, they produced minimal objectively credible proof to support that claim. Whatever the benefits to American and JetBlue of becoming more powerful — in the Northeast generally or in their shared rivalry with Delta — such benefits arise from a naked agreement not to compete with one another. Such a pact is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent,” Sorokin wrote.
He ordered the partnership to end within 30 days of the decision.
It’s the second legal loss for JetBlue in recent months. In March, the federal government sued to block a proposed merger with Spirit, another low-cost carrier. The $3.8 billion deal would be the largest airline industry merger since Alaska Air bought Virgin America in 2016 for $2.6 billion.