Wednesday, July 24, 2024

Justice Department wins lawsuit to terminate JetBlue and American Airlines alliance

Date:

New York (CNN) A U.S. District Court judge ordered on Friday that American Airlines and JetBlue Airways must dismantle their alliance over Northeastern Airlines.

US District Judge Leo Sorokin ruled in favor of the Justice Department, giving the Biden administration a victory in the years-long lawsuit against the airlines’ cooperation. Ministry of Justice The lawsuit was filed in 2021claiming that the two companies raised prices and reduced options for air travelers to and from major cities in the Northeast, such as New York City and Boston.

Sorokin ruled that the airlines have 30 days to end their partnership — just as the busy summer travel season begins.

“It is quite clear to the Court that Defendants’ primary motive in establishing the IAEA was to strengthen their competitive positions against Delta (and, to a lesser extent, United) in Boston and New York,” Sorokin wrote in the ruling Friday. .

The judge’s ruling on Friday said both companies are “formidable and influential players” in air travel — American Airlines Group is the world’s largest airline and JetBlue is the sixth largest in the United States, and wields significant market power in the Northeast. , especially.

In its lawsuit, the Ministry of Justice said that the two companies committed to sharing information about the routes they fly, when they fly them, who will travel on them, and what size aircraft should be used for each flight. The alliance was established in 2020.

The airlines claimed that because of the alliance’s features in the codeshare, companies and frequent flyers had broader access to benefits and discounts. But Sorokin judged that those travelers made up a relatively small percentage of the American clientele.

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The judge also said that schedule and coordination improvements “have resulted in lower capacity, lower frequencies, or reduced consumer choice on multiple routes, including some heavily traveled routes.” It has effectively removed an entire competitor from these markets, according to Sorokin, leaving customers with fewer options for travel between hubs like New York’s LaGuardia and Boston’s Logan airports.

Sorokin said their agreement is an “unreasonable restriction on trade” that violates the Sherman Act, a landmark antitrust law.

“Although the Defendants claim that their greater-than-the-best cooperation will benefit the flying public, they have produced as little objective credible evidence as possible to support that claim,” Sorokin said.

The DOJ also alleged that the two companies share the revenue generated at those two airports, eliminating their incentives to compete with one another. In addition, the Northeast Alliance allowed the parties to pool their gates and take-off and landing clearances, known as “slots,” according to the complaint.

Jonathan Kanter, assistant attorney general in the Department of Justice’s antitrust division, said in a statement on Friday that he was “thrilled” with the decision.

“Today’s decision is a win for Americans who depend on airline competition for affordable travel,” Attorney General Merrick Garland said in a statement Friday.

American Airlines said in a statement that it was “disappointed” with the court’s decision and was “considering the ruling fully” and evaluating its “next steps as part of the legal process.”

“We made clear during the trial that Northeast Alliance has been a huge success for clients,” American said. “Through NEA, JetBlue has been able to grow exponentially in the restricted Northeast airports, bringing lower airline prices and great service to more lines than would have been possible otherwise.”

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CNN has reached out to JetBlue for comment.

In March, the Ministry of Justice lawsuit to halt JetBlue’s $3.8 billion bid for Spirit Airlines.

Garland said the merger would hurt consumers greatly, especially those who depend on the lower fares available on budget-friendly Spirit Airlines.

— CNN’s Christina Karega, Pete Montaigne, and Chris Isidore contributed to this report.

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