When must JetBlue and American Airlines break their alliance? How could it affect passengers?
Jet Blue and American Airlines have been mandated by the courts to break an agreement that was found to reduce competition in the industry.
A decades-long agreement between JetBlue and American Airlines has been forced to cease after a court determined that the collaboration was limiting competition in the airline industry. The Justice Department is giving the two airlines twenty-one days to dissolve the agreement.
What did the agreement include?
The alliance was established in 2010 and was primarily based on a luggage transfer scheme so that passengers could fly with either airline at eighteen airports where American Airlines did not have a presence and an additional twelve American flights that department from New York-JFK and Boston Logan.
Additionally, the agreement included a trade of slots at airports along the East Coast. For instance, American allowed JetBlue to expand its presence in Washington National by providing them with eight of their roundtrip slots.
Consolidation in the airline industry
Consumers have been calling on the government for decades to address the ever-consolidating airline industry. In August 2021, the National Consumers League sent a letter to the Secretary of Transportation, Pete Buttigieg, asking that he take seriously his responsibility as “the sole consumer protection agency, at any level of government, with authority over the air travel industry.” The letter contained specific requirements on actions the department could take to protect consumers by forcing airlines to delay the expiration of vouchers offered to consumers for flights that were not taken during the pandemic. Additionally, the NCL asked that the Secretary look into seating policies to ensure that families do not face significant costs to sit together.
Why was the agreement terminated?
U.S. District Judge Leo Sorokin ruled in the case of JetBlue and American Airlines, and his opinion was motivated by issues of “competition.”
Judge Sorokin wrote that anti-trust laws in the United States were designed “to preserve the free functioning of markets and foster participation by a diverse array of competitors.” The agreement made between the two airlines was not based on this goal but instead on the nation that by working together, they could “unseat a powerful rival.” For Judge Sorkin, the agreement actually threatened market competition, explaining that “agreements among horizontal competitors to dispense with competition” have historically undermined efforts to bring down prices for consumers and improve their experience with the goods or services being sold.
Specifically in the Northeast at airports in New York and Boston, these two airlines have been able to make the entrance of new carriers extremely difficult. Judge Sorokin argued that the current situation and the challenges competitors encounter to secure the gates necessary to operate the flights and the approval of federal regulations to sign off on their flight schedules in “one of the most congested markets in the world” have been made worse by the collaboration between American and JetBlue.
The Department of Justice describes the impact of the decision.
The Justice Department released a statement from Attorney General Merrick B. Garland and Assistant Attorney General Jonathan Kanter for the Justice Department’s Antitrust Division to explain what the impact will be for consumers and the industry.
AG Garland described the decision as “a win for Americans who rely on competition between airlines to travel affordably.” By ending the agreement, the hope is that competition and the service offered to consumers will improve.