The Biden administration's Justice Department has filed an antitrust lawsuit to challenge the partnership between American Airlines and JetBlue that links the two carrier's operations tightly at four of the busiest airports in the Northeast, saying the tie-up will reduce competition and drive fares higher.
The deal between American Airlines and JetBlue was previously approved by former President Donald Trump's Department of Transportation in the final weeks of his presidency, but now the alliance faces the scrutiny of prosecutors in a new presidential administration that has taken a much harder stance on antitrust issues.
"In an industry where just four airlines control more than 80% of domestic air travel, American Airlines' 'alliance' with JetBlue is, in fact, an unprecedented maneuver to further consolidate the industry," said U.S. Attorney General Merrick Garland. "It would result in higher fares, fewer choices, and lower quality service if allowed to continue."
The Justice Department argues that the alliance would have a far-reaching impact beyond just the northeast. American would have less incentive to expand in the Northeast and JetBlue would be discouraged from expanding to other parts of the country where American already flies.
Attorneys General from several states including California, Florida, New York and Washington, D.C. joined in the lawsuit against American and JetBlue.
The aim of the lawsuit is to stop the partnership entirely and undo any network planning and codesharing already done.
The lawsuit comes more than a year after American Airlines and JetBlue announced the "Northeast Alliance" that allows the two airlines to sell tickets on each other's flights in Boston, New York and Newark, N.J. The partnership is already heavily entwined in a deal that the two airlines claim provides a stronger combined rival to major airlines in United and Delta.
The codesharing deal allows American Airlines to strengthen its presence in the Northeast, one of its weaker regions, while giving JetBlue customers access to the vast American Airlines network, which has more destinations in the U.S. than any other airline..
American Airlines CEO Doug Parker said the lawsuit was "ill-founded" during a Washington Post live interview Tuesday.
"They're wrong and we'll prove it," Parker said. "It's already working. We've been at this now since January and we've already increased frequencies to new communities."
In all, the two airlines now share 175 routes out of JFK International, LaGuardia Airport, Boston Logan and Newark Liberty International Airport. It allowed American to create new routes from New York's JFK Airport to Tel Aviv and Athens, which also can be sold by JetBlue. Parker said those routes would never have been created without the partnership.
American said that 58 new routes had been created because of the deal.
As part of the deal, American and JetBlue are not allowed to coordinate fares or schedules outside of the four airports in the New York and Boston regions.
Competitors, including Dallas-based Southwest Airlines and budget carrier Spirit Airlines, filed objections to the merger. Southwest, in a letter to the Department of Transportation in January, said "the carriers are planning a much deeper level of coordination than their public announcements indicate, potentially including coordinating service, pooling slots, and allocating markets."
A similar alliance on the West Coast between American Airlines and Alaska Airlines has not resulted in the same kind of regulatory scrutiny.
The initial review by the Department of Transportation under the Trump Administration resulted in American and JetBlue giving up highly coveted slots at LaGuardia Airport in New York and Ronald Reagan National Airport outside Washington, D.C.
A lawyer for American said it would be difficult to walk back those concessions because the airlines, airports and federal transportation officials are currently allocating slots at those airports based on the deal.
Beyond just the challenge to the JetBlue partnership, the lawsuit questions American's entire network of international alliances and partnerships.
"According to the complaint, American has relentlessly pursued a strategy of industry consolidation through a series of international joint ventures," the Justice Department said in announcing the lawsuit. "Unable to combine with foreign airlines through formal mergers, American has instead pursued consolidation through a series of international joint ventures."