By Revan Aponso
On September 21, 2021, the Department of Justice (DOJ) filed a lawsuit to block a partnership agreement between American Airlines and JetBlue Airlines, citing a violation of antitrust laws. The partnership was announced in July 2020 and approved during the last weeks of the Trump administration. It aims to increase American Airlines’s presence in the NYC and Boston market, which is currently being dominated by Delta and United. The lawsuit is part of a recent effort by the Biden administration to limit the power of large corporations and increase competition, with President Joe Biden signing an executive order promoting competition in July of this year.
This partnership, known as The Northeast Alliance” (NEA), is an agreement where the airlines join forces by coordinating times and routes to take on rivals United Airlines and Delta Airlines at airports in the New York City and Boston areas. While JetBlue and American argue the partnership would allow for expansion of service in congested airports, the DOJ argues, “the Northeast Alliance will eliminate significant competition between American and JetBlue that has led to lower fares and higher quality service for consumers traveling to and from those airports.”
In a press release responding to the suit, JetBlue CEO Robin Hayes refers to the NEA as a strategy to “bring more competition to the Northeast” and a way for the airline to bounce back after the pandemic. He also argues the NEA brings more competition to take on key players Delta Airlines and United Airlines by giving JetBlue access to American’s routes and slot portfolio and customer base, essentially evening the playing field between the largest airlines in the U.S. However, the lawsuit argues both JetBlue and American had plans to increase presence across the northeast with American planning to increase flights out of Boston’s Logan Airport and add destinations. Meanwhile, JetBlue planned to add more flights between Boston Logan and JFK Airport and Laguardia Airport in New York City, Reagan National Airport in Washington D.C. and Philadelphia International Airport.
Along with six other states that joined the suit, U.S. Senator Richard Blumenthal of Connecticut wrote in a letter to U.S. Transportation Secretary, Pete Buttigieg, “I am concerned that the Northeast Alliance is exactly the kind of arrangement that has led us to this point and that will lead to even further consolidation in an already overly concentrated industry. Under the circumstances, this arrangement deserves more scrutiny.” In the same letter he also cites the White House which outlined that the top four commercial airlines already control nearly two-thirds of the domestic market.
The lawsuit also describes the alliance as a “modern-day version of a nineteenth-century business trust.” Lawmakers are drawing parallels between this alliance and the oligopoly that dominated the American Airline industry in the 1970s. In 1978, lawmakers looked to break up the oligopoly through The Airline Deregulation Act of 1978. They removed economic barriers for competition in the airline industry by withdrawing Civil Aeronautics Boards’ (CAB) authority over airfares, routes and schedules. The decreased barriers for entry lead to the rise of budget airlines such as Spirit Airlines, Southwest Airlines and JetBlue Airlines.
The following graphic shared in a JetBlue presentation represents the change in market share throughout the 21st century. From 2000 to 2018 the market share of the top four airlines rose from 55% to 81% through mergers and acquisitions such as American and TWA in 2001, Delta and Northwest in 2008, United and Continental in 2013 and US Airways and American in 2013. Throughout the decades following the enactment of the Airline Deregulation Act of 1978, smaller airlines were created and overtime began to merge with bigger airlines. Therefore, American merging with JetBlue would continue the same pattern that has allowed the top four airlines in the industry to gain more and more power.
The alliance between American and JetBlue represents a new chapter in the battle against airline oligopolies. Lawmakers argue JetBlue merging with American would increase American’s market share and allow for both carriers to reduce competition and in turn raise airfares, eliminating the factor that originally drew consumers to JetBlue: lower airfares. In the end, with the number of mergers and acquisitions over the past two decades, could this lawsuit be the one that calls for changes within antitrust laws in the airline industry? □