The U.S. Justice Department on Tuesday urged a Boston judge to force JetBlue Airways and American Airlines to abandon a strategic alliance in the U.S. Northeast that it said could make airline competition worse if JetBlue successfully acquires Spirit Airlines.
Photo Credit: Shutterstock
At the start of the trial, Justice Department attorney William Jones argued the “unprecedented” alliance decimates airline competition, at the expense of travelers, who would be left to foot the bill for hundreds of millions of dollars in additional costs annually.
He said their Northeast Alliance, unveiled in July 2020, is a “de facto merger” of their operations on the East coast, specifically in Boston and New York that allowed them to coordinate flights and pool revenue in and out of JFK, LaGuardia and Newark airports.
“The loss of the competition will cause prices to rise and quality to fall at those four airports,” Williams noted in his opening statement.
He outlined how the deal would eliminate incentives for American Airlines to reduce prices to steal customers from JetBlue, a “historically disruptive” rival with often better fares. This would ultimately result in the two airlines garnering more than 80% market share in flights from Boston to Washington and six other airports.
The airlines are expected to argue that the alliance is actually pro-competitive because it allows the companies to better compete with both Delta Air Lines and United Airlines by allowing the companies to increase flight capacity.
American is the world’s largest airline. The government argues that airline merges in recent years have led to an immensely consolidated industry, in which American, Delta, United and Southwest Airlines control over 80% of domestic travel. Williams explained that the industry could see even more extreme consolidation if JetBlue’s proposed $3.8 billion acquisition of low-cost competitor Spirit Airlines comes to fruition.
Should that merger – which is subject to antitrust review – move forward, American Airlines will be a main beneficiary as it will now be able to “co-opt two disruptive airlines for the price of one,” Williams said.
JetBlue Chief Executive Robin Hayes is the first witness that the government plans to call. Hayes has stated that no matter the outcome of this proceeding, it will be positive for JetBlue’s pursuit to buy Spirit.
“We’ve had unprecedented amounts of consolidation, which the DOJ has approved and now it’s about how do we make sure the rest of us can continue to discipline the legacy carriers and create that competition,” Hayes said in a statement earlier this year.
Read more articles from Haute Lawyer, visit https://hauteliving.com/hautelawyer
Corporate
September 22, 2022Meta Loses $175M Patent Verdict To Voxer, Plans To Appeal
