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jetblue spirit merger
'Another Big Win for DOJ Antitrust': Judge Blocks JetBlue, American Airlines Alliance
The ruling forces the airlines "to continue competing, eliminating anti-competitive revenue-sharing incentives and setting an important precedent against future consolidation in the industry," said one expert.
May 20, 2023
A Massachusetts-based federal judge on Friday sided with the Biden administration plus six states and the District of Columbia, which launched an antitrust challenge to American Airlines and JetBlue Airways' "de facto merger" for Boston and New York City.
The U.S. Department of Justice (DOJ) along with the attorneys general of Arizona, California, Florida, Massachusetts, Pennsylvania, Virginia, and D.C. filed a civil lawsuit over the airlines' Northeast Alliance (NEA) in September 2021.
"This case turns on what 'competition' means," U.S. District Court Judge Leo Sorokin, an appointee of former President Barack Obama, wrote Friday. "To the defendants, competition is enhanced if they join forces to unseat a powerful rival. The Sherman Act, however, has a different focus."
"Federal antitrust law is not concerned with making individual competitors larger or more powerful. It aims to preserve the free functioning of markets and foster participation by a diverse array of competitors," the judge added. "Those principles are generally undermined, rather than promoted, by agreements among horizontal competitors to dispense with competition and cooperate instead. That is precisely what happened here."
\u201cA federal judge ruled today that JetBlue and America's alliance amounted to an illegal merger. Another big win for DOJ Antitrust.\nhttps://t.co/wuzrarwi5b\u201d— David Dayen (@David Dayen) 1684528367
Sorokin stressed that "American and JetBlue are two of the four largest carriers operating in New York, and two of the largest three in Boston. Delta Air Lines is the only other carrier with a large presence in Boston. Besides Delta and United Airlines, no other carrier matches or approaches in size the defendants' respective positions in New York."
After noting that the pair established the "first-of-its-kind alliance" in 2020, he explained:
This was a sea change in the relationship between two airlines that were direct and aggressive competitors with decidedly different business models and cost structures. There is no doubt that savvy executives representing both defendants earnestly believe the NEA promotes the interests of their respective shareholders and will strengthen American and JetBlue in their rivalry against Delta (and, to a lesser extent, United) in New York and Boston. It is similarly beyond dispute that the NEA involves substantial coordination by two powerful competitors in an industry that, on a domestic level, is closely regulated, highly concentrated, and often volatile.
Reutersreported that after Sorokin ordered the end of the alliance within 30 days, "JetBlue shares fell 1.8% for the day, while American closed down 1.5%," and both airlines said "they were evaluating their next steps."
Meanwhile, the DOJ, its state partners, and other critics of consolidation celebrated the initial court victory.
"Today's decision is a win for Americans who rely on competition between airlines to travel affordably," said Attorney General Merrick Garland in a statement. "The Justice Department will continue to protect competition and enforce our antitrust laws in the heavily consolidated airline industry and across every industry."
\u201cA \u201cde facto merger\u201d between @JetBlue\nand @AmericanAir could have added $700 million in annual costs for consumers. Thanks to @JusticeATR and @MassAGO Campbell for fighting to keep the airline industry competitive\u2014this is a win for folks in MA and beyond. https://t.co/ZZxHFPVH33\u201d— Elizabeth Warren (@Elizabeth Warren) 1684595364
American Economic Liberties Project senior fellow for aviation and travel William McGee agreed that the DOJ Antitrust Division's successful challenge of the NEA "is a win for passengers and the public."
"Blocking this de facto merger forces JetBlue and American to continue competing, eliminating anti-competitive revenue-sharing incentives and setting an important precedent against future consolidation in the industry," McGee said. "We hope to see a similar ruling in favor of the Justice Department's suit against the JetBlue-Spirit merger, another illegal deal that would accelerate concentration and drive up fares nationwide."
\u201cThe context for this is a 45-year trend toward concentration and anticompetitive re-orientation of routes since the industry was deregulated in 1978. @WilliamJMcGee and I have a forthcoming piece describing the myriad failures of the deregulation experiment. This is a good day.\u201d— Lee Hepner (@Lee Hepner) 1684528029
As Common Dreams reported in March, the DOJ joined with the attorneys general of Massachusetts, New York, and D.C. to file a civil suit against the JetBlue-Spirit merger, arguing that "by eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely."
McGee said at the time that by "blocking this blatantly anti-competitive deal, the Department of Justice is standing up for passengers, workers, and communities across the country."
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DOJ Sues to Block 'Blatantly Anti-Competitive' JetBlue-Spirit Airlines Merger
"The Department of Justice is standing up for passengers, workers, and communities across the country," said one expert.
Mar 07, 2023
Consumer and labor advocates on Tuesday welcomed a U.S. Department of Justice antitrust lawsuit seeking to block JetBlue's proposed $3.8 billion acquisition of Spirit Airlines, its biggest competitor, a deal that critics say would harm passengers and workers.
The Department of Justice (DOJ), along with the attorneys general of Massachusetts, New York, and Washington, D.C., allege in the civil antitrust suit that "by eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely."
While the two airlines argue that their merger would increase competition, U.S. Attorney General Merrick Garland said in a statement that the deal "would result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly."
"Americans want more choices and lower prices for airline tickets, not another giant merger."
Consumer advocacy groups agreed with Garland's assessment.
"In blocking this blatantly anti-competitive deal, the Department of Justice is standing up for passengers, workers, and communities across the country," William J. McGee, senior fellow for aviation and travel at the American Economic Liberties Project, said in a statement. "Don't believe JetBlue's corporate spin: Allowing JetBlue to gobble up a low-cost competitor and accelerate concentration in the aviation industry will immediately drive up fares nationwide."
\u201cIt's official: The Justice Department is suing to block the $3.8 billion JetBlue-Spirit merger.\n\nBefore 1978 the government used to regulate airlines heavily, even setting ticket prices.\n\nIt's time for the government to step in and regulate the industry again.\u201d— More Perfect Union (@More Perfect Union) 1678206220
Transport Workers Union of America (TWU)—which represents JetBlue flight attendants—also opposes the deal.
"We have yet to see a credible argument that a consolidated JetBlue-Spirit will enhance competition in the domestic airline industry," TWU international president John Samuelsen wrote in a letter to Garland and U.S. Transportation Secretary Pete Buttigieg last month.
"Workers and passengers will be harmed, just as they have been in many past airline consolidations, as the new airline follows the business practices, pricing strategies, and labor cost-cutting practices previous combined carriers have undergone," Samuelsen added.
\u201cLet us be clear- This hostile takeover is not good for the TWU\u2019s IFCs @JetBlue or our Guest Service Agents @SpiritAirlines , or the flying public, period. Our job is to defend TWU members and @transportworker is working hard to ensure that this acquisition is dead on arrival .\u201d— John Samuelsen (@John Samuelsen) 1677677968
Some opponents of the airline megadeal noted that the U.S. Department of Transportation (DOT) has the power to do more to block anti-competitive mergers and acquisitions.
As the Economic Liberties Project noted: "The DOT already has broad, existing authority under the Clayton Act to block airline mergers. Similarly, under Title 49 of the U.S. Code, DOT has broad authority to investigate and prosecute anti-competitive airline mergers, and to deny route transfers that contravene the public interest or affect domestic competition."
The group also highlighted President Joe Biden's call for Buttigieg to deliver financial relief to air travelers and align the DOT with the White House's plan to promote a more competitive economy.
\u201cAmericans want more choices and lower prices for airline tickets, not another giant merger. Critical action to protect consumers and workers by AAG Kanter & Secretary Buttigieg. I've urged federal agencies to heed @POTUS' call to use their antitrust tools to promote competition.\u201d— Elizabeth Warren (@Elizabeth Warren) 1678207578
"Secretary Buttigieg and the Department of Transportation have broad authority to block harmful mergers and promote competition throughout the airline industry," McGee said. "We're also pleased to see reporting that DOT plans to use their power, embracing President Biden's competition agenda, to stop the JetBlue-Spirit deal."
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