Inside the Antitrust Challenge to the American Airlines--JetBlue Airways "Northeast Alliance"

• Published in: The Air and space lawyer Vol. 36; no. 1; pp. 1 - 14
• Main Author: Dryden, Benjamin R
• Format: Journal Article
• Language: English
• Published: Chicago American Bar Association 01.10.2023
• Subjects: Agreements; Air fares; Airline operations; Airlines; Airports; Antitrust law; Antitrust laws; Competition; Joint ventures; Restraint of trade; Revenue; Revenue management; Revenue sharing; Transportation; Trials; United States; Massachusetts; United States > US; New York City New York
• ISSN: 0747-7449; 2163-0216

On May 19, 2023, after a month-long bench trial, a federal district court in Massachusetts found the Northeast Alliance (Alliance) between American Airlines (American) and JetBlue Airways (JetBlue-and together with American, the Parties) violated the federal antitrust laws.1 Announced in 2020, the Alliance was a contractual joint venture that had effectively combined the Parties' operations for certain flights in and out of Boston, New York City, and Newark (collectively, Northeast). Commitments to the Department of Transportation Before the Alliance could take effect, the Parties were required to notify the Department of Transportation (DOT) to allow DOT to review the proposed arrangement.4 As part of DOT's review, DOT consulted with DOJ to determine whether the Alliance would reduce competition or otherwise violate antitrust laws or principles.5 After a nearly six-month DOT review, in January 2021 the Parties reached an agreement with DOT (DOT Agreement) intended to ensure that the Alliance would achieve the procompetitive benefits the Parties expected.6 Among other things, the DOT Agreement stipulated that the Parties would not discuss fares or "revenue management strategies" with each other with respect to flights within the scope of the Alliance.7 Moreover, with respect to flights outside the scope of the Alliance, the DOT Agreement provided that the Parties would not discuss fares, revenue management strategies, routes, schedules, or capacity8 The DOT Agreement also required American and JetBlue to divest to third-party airlines a total of 13 slot pairs at JFK and Ronald Reagan Washington National Airport. [...]the federal judge presiding over the trial heard testimony from over two dozen witnesses over the course of a month-long trial that included more than one thousand exhibits. Fourth, the court found that the Government had demonstrated a harm to competition through indirect, structural evidence, with proof that American and JetBlue each have the power to set pricing in the Northeast, as well as by demonstrating that the region is heavily concentrated and has substantial barriers to entry.18 Once the Government met its initial burden of showing a substantial anticompetitive effect, the burden of defending the Alliance fell to American and JetBlue.