The government's antitrust lawsuit against American Airlines and JetBlue begins Tuesday and the outcome could determine how closely the Biden administration examines other airline deals, including JetBlue's pending attempt to buy Spirit Airlines.
The Justice Department and six states are suing American and JetBlue to break up their partnership in the Northeast, namely New York and Boston.
It is a significant test of the administration’s opposition to mergers — even though the American-JetBlue partnership is not a full merger. The government argues that the alliance will reduce competition and lead to higher fares.
The Trump administration approved the alliance, but the Justice Department began taking a closer look shortly after President Joe Biden took office.
American and JetBlue will argue that the partnership has already been in effect for about 18 months and has allowed each airline to offer new routes that would not be economical for either on its own. They say there is no evidence that the deal is hurting consumers.
Current and former airline CEOs are among the possible witnesses identified by prosecutors and lawyers for the airlines. Delta Air Lines is attempting to keep two of its most senior executives from being called to testify, saying they are too busy in Atlanta to attend the trial in federal court in Boston.
U.S. District Court Judge Leo Sorokin has set aside nearly three weeks for the trial. There will be no jury. Sorokin could take weeks or even months to issue a decision, which is likely to be appealed by the losing side.
When the Justice Department filed the lawsuit a year ago, Attorney General Merrick Garland called the American-JetBlue alliance “an unprecedented maneuver” that would lead to higher fares, fewer choices, and poor service for travelers.
The Justice Department's top antitrust official, Assistant Attorney General Jonathan Kanter, echoed those arguments during a hearing last week before a Senate subcommittee. He said that while new airlines have entered the business over the years, leading to lower fares and better service, too many of them have been swallowed up by mergers and acquisitions.
“We remain committed to fighting airline concentration when it breaks the law," Kanter told the senators. "We are looking very carefully at our approach to airline consolidation ... we have numerous other matters under review.”
Kanter didn't say what those other matters are, but one likely could be JetBlue's proposal to buy Spirit for $3.8 billion. Spirit CEO Ted Christie, who preferred a merger with Frontier Airlines, fought JetBlue for months by arguing that antitrust regulators would never allow his low-fare airline to be swallowed up by JetBlue, a more conventional and higher-priced carrier.
Under the alliance, American and JetBlue sell seats on each other's flights and share the revenue. They say they coordinate on schedules but not prices. And they give customers reciprocal benefits in the frequent-flyer programs.
American and JetBlue argue that their alliance is not a merger and helps them compete against United and Delta in the Northeast. They say the alliance has let them add 50 new routes, add flights on previous routes, and increase their share of the Northeast market from 16% to 24%.
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