Will airfares drop as JetBlue and American Airlines compete with each other? Or would an airline alliance create more competition with Delta, United and Southwest, putting more price pressure on the major airlines?
That is the central question of The Justice Department’s Antitrust Case against JetBlue and the US over their “Northeast Alliance” partnership.
The Antitrust trial begins on Tuesday, the DOJ and the two airlines released opening statements and testimony from JetBlue CEO Robin Hayes in response to DOJ questions. Both sides are attached familiar talking pointswith the DOJ suggesting that a union of airlines would eliminate competition and lead to higher fares, and the two airlines arguing that by combining they could create stronger competition with United and Delta already entrenched in the New York and Boston markets.
Sign up for our daily newsletter
Want more specific airline news? Sign up for TPG’s free biweekly Aviation newsletter.
DOJ Attorney William Jones, in his opening statement, suggested that the union would cost consumers $700 million annually at higher fares, saying the union was “a merger about it all.” minus the name” and the two could operate like “a single airline at the expense of the traveler.” Jones cited internal messages from American Airlines executives before the union arguing that the airline The airline sees JetBlue as a competitive threat that puts pressure on fares.
The government further argues that there are other alternatives that could help JetBlue and Americans compete in the non-union Northeast – possibly excluding Boston from the union, where Americans are less disadvantaged in the region. New York due to lack of location restrictions; Americans choose to sell or lease space to JetBlue; or codeshare sharing will exclude any routes where airlines overlap before the alliance begins.
However, lawyers for the airlines argue that in the 18 months since the NEA was established, the higher fares that the Justice Department warned have failed to make it clear, that consumers have access to the best deals. Better options and the competitive landscape shaped by previous mergers have left them. cannot compete in the Northeast market alone.
Richard Schwed, an attorney from Shearman & Sterling representing JetBlue, argued in his opening statement, adding that the alliance has provided “immediate, tangible benefits to consumers”. “
Schwed cites 50 new non-stop routes that have been added to or from New York or Boston since the alliance was formed, 90 nonstop routes with increased capacity, 17 new international routes covered by the alliance and Total capacity increased by more than 17% on the routes covered by the alliance.
Partner development: American adds 6 new routes as part of Northeastern Alliance’s partnership with JetBlue
Dan Wall, an attorney from Latham & Watkins representing American Airlines, also argued that the case DOJ intends to present would not meet the burden of proof required for antitrust action.
“This case went to court without direct evidence of adverse effects,” Wall said.
Wall also argued that the Department of Transportation, which oversees airline mergers and alliances, has taken a “wait and see” approach to the union and has not discovered any problems so far. which topic.
Merging is pending between JetBlue and extremely cheap competitor Spirit, presented by the government as an example of further anticompetitive action, with Jones arguing that with such a merger, “Americans can partner with two disruptive competitors for the price of one .” Lawyers for the airlines have denied that, saying the deal is separate and unrelated to the NEA, and that “if it has anything to do with it, it’s further evidence of independence. of JetBlue from Americans.”
In Hayes’ testimony, the JetBlue director said that negotiations between the airlines began at the end of 2019 and were accelerated as COVID-19 hit Q1 and Q2 2020. The alliance was made public. father in July.
Hayes also argues that JetBlue is incentivized to continue increasing capacity and offering competitive fares and products, despite the alliance’s supposedly “metal-neutral” nature, by the potential revenue it generates. can be earned by recruiting passengers on participating aircraft and join with its frequent flyer program rather than Americans, rejecting government accusations that the revenue-sharing model used by airlines has undermined all competition.
In the alliance, Hayes said, “I’d rather let someone fly on a JetBlue plane.”
The trial, which is expected to last up to three weeks, is expected to feature testimony from American Airlines CEO Robert Isom, former CEO Doug Parker and Chief Commercial Officer Vasu Raja, along with testimony. added by Hayes, JetBlue CEO. Other stakeholders, including network planners for the airlines and former chief executive Scott Laurence, who built the alliance on JetBlue’s side. A decision from U.S. District Judge Leo Sorokin could take weeks or months.
TPG is reporting from the US District Court in Boston, so stay tuned for the latest on the NEA trial.
