By Tom Ozimek
A federal judge in Boston ruled Friday that American Airlines and JetBlue Airways must abandon their partnership in the northeastern United States on grounds that the merger between the two carriers is anti-competitive and harms customers.
The partnership between the two air carriers, a joint venture called the Northeast Alliance, was approved by the Transportation Department under former President Donald Trump and took effect in early 2021.
But the Justice Department (DOJ) under President Joe Biden sued to block the joint venture, arguing it would eliminate important competition and harm air travelers across the country.
Following a multi-week trial that began in September 2022, the court ultimately sided with the DOJ, arguing that by consolidating their operations in Boston and New York City, the two airlines violated Section 1 of the Sherman Act because their joint venture increased fares and reduced customer choice.
U.S. District Judge Leo Sorokin wrote in his May 19 decision (pdf) that each of the defendants—American Airlines and JetBlue Airways—”is a formidable and influential player in the air travel market” in the United States and that their partnership “immediately and substantially upsets the competitive balance in a highly concentrated industry.”
“These two powerful carriers act as one entity in the northeast, allocating markets between them and replacing full-throated competition with broad cooperation,” Sorokin wrote in the ruling.
At the same time, neither of the two airlines provided enough evidence of any procompetitive effects arising from their partnership, which the judge ordered dissolved within 30 days.
The Justice Department hailed the ruling.
“Today’s decision is a win for Americans who rely on competition between airlines to travel affordably,” Attorney General Merrick Garland said in a statement.
Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division said that “the outcome of this litigation recognizes the value of competition in the airline industry.”
The airlines, meanwhile, said they were considering whether to appeal.
“We believe the decision is wrong and are considering next steps,” said American Airlines spokesman Matt Miller. “The court’s legal analysis is plainly incorrect and unprecedented for a joint venture like the Northeast Alliance. There was no evidence in the record of any consumer harm from the partnership.”
JetBlue spokeswoman Emily Martin expressed disappointment with the ruling.
“We made it clear at trial that the Northeast Alliance has been a huge win for customers,” she said in a statement.
American Airlines is the biggest U.S. airline while JetBlue is the sixth-biggest.
The Northeast Alliance partnership let the two airlines sell seats on each other’s flights and share revenue. The joint venture covered many of the carriers’ flights to and from Boston’s Logan Airport and three airports in the New York City area: John F. Kennedy, LaGuardia, and Newark Liberty in New Jersey.
JetBlue said in a statement that the partnership has been beneficial to customers and that it extended the airline’s low fares “to more routes than would have been possible otherwise.”
American Airlines said that the alliance has been “a huge win for customers and anything but anticompetitive.”
But the DOJ said in its lawsuit that the partnership gave the two airlines over 80 percent of market share in flights from Boston to Washington and six other airports. It also argued that the alliance would put nearly $700 million in extra annual costs on customers.
During the trial, representatives for the two airlines and economists gave starkly different opinions on how the partnership would impact prices and competition.
The airlines argued at trial that the DOJ couldn’t prove that the partnership had increased fares while arguing that the alliance would benefit customers.
The judge, however, was not persuaded, arguing that the airlines produced only “minimal objectively credible proof” to support the claim that customers would benefit from the partnership.
“Though the defendants claim their bigger-is-better collaboration will benefit the flying public, they produced minimal objectively credible proof to support that claim,” Sorokin wrote in the ruling.
“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.”
The Sherman Act, which the judge ruled the airlines had violated with the alliance, is a federal law that prohibits actions that unreasonably restrain trade.
The Associated Press contributed to this report.