BOSTON (Legal Newsline) - Saying airline economic experts were biased, a federal judge ordered American Airlines and JetBlue to end an alliance at the Boston and New York airports that the carriers argued would help each mount more effective competition dominant against Delta Air Lines.
The agreement between American and upstart JetBlue actually threatened to reduce competition and raise fares at Boston’s Logan Airport and LaGuardia and JFK in New York, U.S. District Judge Leo Sorokin wrote in a May 19 ruling.
“Whatever the benefits to American and JetBlue of becoming more powerful—in the northeast generally or in their shared rivalry with Delta—such benefits arise from a naked agreement not to compete with one another,” he wrote, ordering an end to the agreement within 30 days. “Such a pact is just the sort of `unreasonable restraint on trade’ the Sherman Act was designed to prevent.”
The U.S. Justice Department sued to block the agreement in September 2021, months after American and JetBlue implemented the plan to share landing slots and revenue at the three airports. During the bench trial ending last November, the airlines bashed the Justice Department’s expert, Georgetown University economist Nathan Miller, saying he predicted price increases that would exceed those seen in actual airline mergers.
Judge Sorokin saw it differently, calling Miller “a thoughtful, credible, and well-credentialed expert witness.”
“The court credits Dr. Miller’s analysis to the extent it suggests the (Northeast Alliance) will create upward pricing pressure, a conclusion which is well supported by basic economic principles and incentives,” the judge wrote.
All four defense experts worked for the same firm and none had testified against a major airline for at least 20 years, the judge wrote, leading him to “view the testimony of each of these experts with heightened skepticism.”
The government argued the revenue-sharing agreement between JetBlue and American discouraged the airlines from “cheating the pool” by expanding in a way that deprived the other airline of shared revenue. JetBlue kept its London routes out of the agreement but shared in American’s transatlantic revenue, for example, lessening the need to add capacity on that highly competitive route.
The government’s experts also said JetBlue’s operating costs were increased under the agreement, known as the Northeast Alliance, and both airlines reduced capacity elsewhere to increase flights in the northeast, hurting competition elsewhere.
“There is simply no credible evidence that American and JetBlue have continued to treat each other as competitors within the NEA,” the judge wrote.
The combination left consumers effectively with two dominant carriers in Boston and New York, the judge concluded: Delta and NEA. The two controlled 73% of flights at Logan and 84% of slots at JFK and LaGuardia.