On May 19, a federal judge ruled that American Airlines and JetBlue's Northeast Alliance was tantamount to an unlawful merger and needed to be dissolved within 30 days.
Attorney General Merrick B. Garland and Assistant Attorney General Jonathan Kanter for the Justice Department’s Antitrust Division said that the decision was a “win for Americans who rely on competition between airlines to travel affordably”.
The court’s decision followed a multi-week trial that began in September 2022. The Justice Department sued to stop American Airlines and JetBlue from continuing the Northeast Alliance. The court ruled that the Northeast Alliance, which comprises a series of agreements between American Airlines and JetBlue with the two airlines consolidating operations in Boston and New York City, violated Section 1 of the Sherman Act because it increased fares and reduced choice for American travellers in many domestic markets for scheduled air passenger service.
“We are disappointed in the decision,” a JetBlue spokeswoman said in a statement. “We made it clear at trial that the Northeast Alliance has been a huge win for customers. 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 Court’s legal analysis is plainly incorrect and unprecedented for a joint venture like the Northeast Alliance,” an American Airlines spokesman said in a statement. “There was no evidence in the record of any consumer harm from the partnership, and there is no legal basis for inferring harm simply from the fact of collaboration.”
The decision is appealable but analysts doubt whether the airlines will appeal the ruling. TD Cowen’s Helane Becker said that it wasn’t convinced the airlines would launch an appeal even though both airlines said that they would review the court's decision. JPMorgan’s Jamie Baker simply stated, “The government won. Let’s move on.”
The ruling is viewed as a negative for both American and JetBlue, which also does not bode well for approval of Spirit’s proposed merger with JetBlue. Jamie Baker suggests that the ruling could indicate that the current administration could be “reasonably characterized as anti-M&A” and that now the NEA is to be dissolved, Spirit has lost a bargaining chip in its bid to gain approval for the JetBlue merger. TD Cowen’s Becker concurs stating: “We do not believe the [Spirit-JetBlue] merger will ultimately receive regulatory approval, in part because of the Justice Department's suit to block it, but also because at least four state attorneys general joined the lawsuit to block.”
For the more immediate future, American and Spirit have a task ahead of them to unwind the alliance and ensure all those summer passengers are rebooked on suitable flights. Analysts suggest that American has a more pressing need to reassess its hub strategy going forward, especially its presence or lack thereof in the New York market which would evaporate without the NEA.
Delta Air Lines will emerge as the biggest winner from the demise of the NEA since it has hubs at LaGuardia and at JFK, while United will gain at Newark airport.