JetBlue is planning to end its partnership with American Airlines - the Northeast Alliance (NEA) - after losing a federal court case that ordered the airlines to end the agreement. JetBlue states that it will now focus on acquiring Spirit Airlines.
In spite of disagreeing with the court’s ruling against the NEA and deep conviction in the pro-competitive benefits of the NEA, JetBlue has decided not to appeal against the court’s decision to terminate the NEA.
“After much consideration, JetBlue has made the difficult decision not to appeal the court’s determination that the NEA cannot continue as currently crafted, and has instead initiated the termination of the NEA, beginning a wind down process that will take place over the coming months,” JetBlue released a statement after the order. “We will now turn even more focus to our proposed combination with Spirit, which is the best and most effective opportunity to truly transform the competitive landscape in the U.S. and bring the JetBlue Effect to more routes and markets across the country,” the statement read.
Meanwhile, American Airlines is planning to appeal the ruling. Shortly after JetBlue’s statement, American released its own statement saying that it respects JetBlue’s decision to focus on its other antitrust and regulatory challenges but that it will press ahead with its own appeal in the case.
“JetBlue has been a great partner, and we will continue to work with them to ensure our mutual customers can travel seamlessly without disruption to their travel plans,” American said in a statement on its website.
JetBlue’s deal to buy Spirit came together after JetBlue and American launched the Northeast partnership. The NEA allowed both airlines to share passengers and revenue and to coordinate schedules. American and JetBlue said that they needed the alliance to compete against big carriers such as United and Delta in congested airports in the New York and Boston areas.
Commenting on the American’s decision to appeal the ruling, Helane Becker, Managing Director, TD Cowen said: “American was reliant on the Northeast Alliance for passengers to feed its international flights at NY JFK International Airport. The airline doesn't have the regional jet capacity to overlay the JetBlue flights in the Northeast.”
“We were surprised in June when American said it would appeal the court's decision. We believe this was in part due to the timing of the judge's decision, which would have meant inconveniencing thousands of passengers during the busy summer season. By appealing, the airlines have time to re-accommodate passengers,” Becker added.
In May, a federal judge ruled that the partnership was anticompetitive and it violates the anti-trust law and ordered both the airlines to end the alliance. The Justice Department also sued to block JetBlue's agreement to buy Spirit for $3.8 billion on grounds that they would hurt competition.
Experts believe that although the deal with American will help JetBlue grow in one region, the deal with Spirit would let JetBlue grow quickly to nearly 10% of the nationwide air-travel market bringing JetBlue closer in terms of size to United, Delta, Southwest and American.
In a securities filing, JetBlue informed American of its decision to terminate the partnership because of judge’s ruling on June 29, 2023.
Meanwhile, a trial has been scheduled for October in the Justice Department's lawsuit against the JetBlue-Spirit merger. The government argues that consumers will suffer if the nation’s biggest discount airline - Spirit - is eliminated.
"JetBlue is focused on closing its merger with Spirit Airlines; the trial in that case starts in mid-October. We believe there is significant government and regulatory pressure against the merger, but they answer at least one objection by walking away from the NEA," Becker added.
JetBlue won the deal to acquire Spirit in July 2022 after a bidding war with Frontier Airlines. JetBlue stands to benefit from access to more aircraft when supply chain constraints have led to struggling demands along with huge pilot influx to operate more flights.
The JetBlue-Spirit deal is facing strong resistance from the Biden administration as they find it harmful for competition.
The Justice Department sued to block the deal in March 2023. “JetBlue’s plan would eliminate the unique competition that Spirit provides — and about half of all ultra-low-cost airline seats in the industry — and leave tens of millions of travelers to face higher fares and fewer options,” the department said in its statement.