BOSTON (Legal Newsline) – The Department of Justice will get to sue American Airlines and JetBlue Airways over their “Northeast Alliance,” a business arrangement the DOJ thinks will hurt customers.
Boston federal judge Leo Sorokin wrote June 9 that the DOJ and six states have adequately alleged the agreement is “likely to harm competition in the relevant markets, and that American and JetBlue control a significant share in an already concentrated market.”
That ruling rejects the airlines’ motion to dismiss the lawsuit, which argued the Department of Transportation already signed off on the Northeast Alliance. The motion, filed Nov. 22, argued it has led to more flights to more destinations and “large increases in every airline industry measure of output.”
The agreement has American and JetBlue sharing revenue and coordinating flights into and out of four major airports – Boston Logan, John F. Kennedy International, LaGuardia and Newark Liberty International.
The companies briefed both the DOJ and the DOT before announcing the alliance in July 2020. After a six-month investigation, the DOT gave the pact its blessing as long as it increased options for consumers.
“Through schedule coordination, asset swaps, codesharing, reciprocal frequent flyer benefits, seamless service initiatives, and a revenue-sharing arrangement designed specifically to incentivize each airline to grow capacity, the NEA makes American and JetBlue more attractive to consumers, more efficient and much more productive with the finite resources available,” the motion said.
Because the DOT approved the agreement and because it has had the impact on the industry it was promised to have, the DOJ is unable to bring suit, the companies said.
The six states that joined the feds as plaintiffs are Arizona, California, Florida, Massachusetts, Virginia and Pennsylvania. They allege the 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. It will also closely tie JetBlue’s fate to that of American, diminishing JetBlue’s incentives to compete with American in markets across the country, the suit claims.
They want a ruling that says the NEA violates the Sherman Act. That can’t happen, the companies say, because the plaintiffs fail to allege any harm and fail to allege that revenue sharing is anticompetitive.
American is represented by Daniel Wall and other lawyers from Latham & Watkins. JetBlue is represented by Richard Schwed and lawyers at Shearman & Sterling, as well as Glenn MacKinlay of McCarter & English in Boston.