Judge denies antitrust enforcers’ request to monitor American Airlines, JetBlue following merger termination

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Update:

• A federal judge in Massachusetts denied a request by antitrust enforcers to monitor and issue restrictions on future business agreements by American Airlines and JetBlue with other airline carriers. 
• Antitrust enforcers with the Department of Justice had requested American Airlines and JetBlue be monitored for five years. 
• The judge determined the request was unnecessary and “excessively harsh.”
• American Airlines and JetBlue argued the proposed sanctions would harm competition. 
• The two airlines recently terminated what was known as the Northeast Alliance, a code and revenue-sharing pact that was determined to be a violation of the Sherman Act in May. 
• The judge determined that, in light of the Northeast Alliance being terminated, trustee monitoring would not be necessary going forward. 

JetBlue and American Airlines merger overview:

• Who: A federal judge blocked a proposed merger between JetBlue and American Airlines.
• Why: After a monthlong trial, the judge found the proposed merger would stifle competition and violate federal antitrust laws.
• Where: The JetBlue and American Airlines merger lawsuit was filed in Massachusetts federal court.
• What are my options: Try Expedia for the best airline deals.

(May 25, 2023)

A Massachusetts federal judge blocked a proposed JetBlue and American Airlines merger, ruling the deal would violate federal antitrust laws.

U.S. District Judge Leo T. Sorokin made his determination following a month-long trial over the merits of the proposed merger. In his 94-page order, he says the deal would violate the Sherman Act.

Under their proposed Northeast Alliance (NEA) partnership, JetBlue and American Airlines “essentially agreed to operate as one airline for most of their flights in and out of New York City and Boston.”

Judge Sorokin says this type of partnership was a “sea change” in the relationship between two airlines that were direct competitors with different business models and cost structures.

Feds, state challenged JetBlue, American Airlines merger 

The District of Columbia, Arizona, California, Florida, Massachusetts, Pennsylvania and Virginia joined the U.S. government in its antitrust lawsuit challenging the NEA, according to the judge’s order.

The trial featured testimony from two dozen witnesses, plus excerpts from depositions of 17 additional witnesses. More than 1,000 exhibits were reportedly admitted into evidence.

“After close attention to the evidence at trial and a careful review of the voluminous submissions by the parties, certain points became clear,” Judge Sorokin says in his order.

The judge noted the airline markets in New York and Boston are highly concentrated with extremely rare opportunities to enter or expand. JetBlue was one of the only low-cost airlines with a significant presence in a tight market dominated by bigger, more expensive carriers.

“With the NEA, American and JetBlue transformed themselves from competitors to collaborators, joining forces to create a single ‘optimized network,’” the judge says, noting nearly three-quarters of JetBlue’s operations involve flights in or out of the NEA.

Judge Sorokin acknowledged the airlines’ claims that their collaboration would benefit travelers but found that they did not provide credible proof to support the claim.

“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 each other,” the judge writes. “Such a pact is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent.”

In January, a federal judge consolidated two JetBlue and American Airlines merger class action lawsuits in New York federal court.

What do you think of the judge’s decision to block the JetBlue and American Airlines merger? Join the discussion in the comments.

The United States is represented by Bonny Sweeney, William H. Jones II, Kate M. Riggs, Edward Duffy, Grant Bermann and Sarah P. McDonough of the U.S. Department of Justice’s Antitrust Division.

The JetBlue and American Airlines merger lawsuit is United States of America, et al. v. American Airlines Group Inc., et al., Case No. 1:21-cv-11558-LTS, in the U.S. District Court for the District of Massachusetts.

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