AP – Airline lawyers and the United States’ (US) Justice Department delivered starkly contrasting views of an alliance between American Airlines and JetBlue during closing arguments on Friday in a case that will test the US President Joe Biden’s administration’s aggressive enforcement of antitrust laws.
The partnership lets American and JetBlue coordinate schedules and share revenue on many routes to and from New York and Boston, which the government argued will cost consumers hundreds of millions of dollars a year in higher fares.
“It is a very important case to us… because of those families that need to travel and want affordable tickets and good service,” Justice lawyer Bill Jones said in federal district court in Boston.
Lawyers for the airlines said the partnership has spawned new routes that are good for travellers. They argued that during a month-long trial, the government failed to show any evidence that the deal has hurt consumers.
“It’s all just an idea,” said the lawyer for American Daniel Wall.
When attorneys finished their arguments, US District Judge Leo Sorokin said he is still reading material hundreds of pages of material submitted this week by both sides. A decision is likely weeks away.
The government’s case is intuitive – that two big airlines working together instead of competing will reduce choices for consumers and lead to higher fares. The lawsuit, joined by six states and the District of Columbia, is also speculative, however.
The case will come down to the judge’s reading of antitrust law, and his judgement about whether the government presented enough evidence to kill the partnership, which the airlines have been rolling out since early 2021.
Looming over the trial is JetBlue’s proposal to buy Spirit Airlines, the nation’s biggest discount carrier, for USD3.8 billion. Spirit Airlines shareholders voted last month to approve the sale despite JetBlue declining Spirit’s request to drop its partnership with American to reduce regulatory risk.
The trial featured testimony by current and former airline chief executive officers and economists who differed wildly on the impact that the alliance will have on competition and ticket prices. The US Transportation Department approved the alliance 10 days before the end of the former president Donald Trump’s administration. Soon after Biden took office, however, there were rumblings that the Justice Department was taking a closer look, and it sued to kill the deal in September 2021.
The case is a test of the Biden administration’s resolve to take on mergers and other business arrangements that it believes stifle competition and cost consumers more money.
“The Justice Department has a very good case,” said an antitrust expert and economics professor at Yale University Florian Ederer who has followed the matter. “The NEA harms competition, it probably harms consumers. (American) has eliminated a disruptive competitor, a maverick.”
The stakes are even higher because the Justice Department is coming off two losses in big antitrust cases this fall. It failed to stop a merger of sugar refiners and couldn’t block a major acquisition in the health insurance industry.
Former American Airlines executive Robert Britton who teaches marketing at Georgetown University said the government was acting too hastily – before any harm from the alliance is clear. “They’re saying, ‘You haven’t done anything wrong so far, but you might in the future, so we’re going to arrest you now,” Britton said.
American and JetBlue said the alliance is already helping them compete against Delta Air Lines and United Airlines in two critical markets. Their experts testified that by taking on entrenched rivals, the American-JetBlue deal will save consumers up to USD635 million a year.
American’s chief commercial officer Vasu Raja testified that before the alliance, the company trailed its two big rivals in the Northeast. He said that American flew non-stop to only 31 of the top 50 destinations out of New York.
Now it flies to 47 of them and is working on the other three. Raja added that by coordinating their schedules, additional passengers from JetBlue made it possible for American to offer new international routes, such as to Tel Aviv.
Executives of rivals Southwest Airlines and Spirit Airlines testified that the partnership has created unfair competition for low-cost carriers that also want to grow in New York and Boston. Each side called economists to bolster its case.