U.S. Challenges American Airlines, JetBlue Alliance At Start Of Antitrust Trial

The U.S. Justice Department on Tuesday urged a judge to force American Airlines and JetBlue Airways to scrap a partnership in the U.S. Northeast that it said could make airline competition worse if JetBlue acquires Spirit Airlines.

At the start of a three-week trial in Boston, Justice Department attorney William Jones argued the "unprecedented" partnership destroys airline competition at the expense of travelers, who face 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 in Boston and New York that allowed them to coordinate flights and pool revenue in and out of Boston and New York's JFK, LaGuardia and Newark airports.

"The loss of the competition will cause prices to rise and quality to fall at those four airports," Williams said in his opening statement.

He said the deal eliminates incentives for American Airlines to reduce prices to lure customers from JetBlue, a "historically disruptive" rival with often better fares and give the two airlines more than 80% market share in flights from Boston to Washington and six other airport.

The companies' lawyers will deliver opening statements later on Tuesday in the case, which the Justice Department filed alongside six states last year.

They companies are expected to argue that the alliance is pro-competitive because it allows the companies to better compete with Delta Air Lines and United Airlines by allowing the companies to increase capacity. JetBlue, they will say, will remain a maverick.

The trial starts after a week in which U.S. judges ruled against the government in two antitrust fights: sugar and insurance.

American is the world's largest airline. Airline mergers in recent years have led to a highly consolidated industry, in which American, Delta, United and Southwest Airlines control over 80% of domestic travel, the government argues.

Williams noted the industry will potentially consolidate more if JetBlue's proposed $3.8 billion acquisition of low-cost rival Spirit Airlines moves forward.

Should that merger -- which is subject to antitrust review -- move forward, American Airlines will be a beneficiary, Williams said, as it will now be able to "co-opt two disruptive airlines for the price of one."

JetBlue Chief Executive Robin Hayes is the first witness that the government plans to call. Hayes has said that no matter how this proceeding ends up, it will be good for JetBlue's effort 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 told Reuters earlier this year.