A Spirit Airlines executive denounced the American Airlines-JetBlue Airways partnership in federal court on 30 September – just two months after Spirit agreed to be purchased by low-cost competitor JetBlue.
John Kirby, Spirit’s vice-president of network planning, testified in Boston that the American-JetBlue alliance stifles competition in an already highly consolidated industry, adding to previous testimony that JetBlue has become a “feeder airline” for American.
“The alliance is great for American and JetBlue,” Kirby tells the court. “It does allow them to operate similar to a merger without being merged. But overall, I think competition is harmed by this combination.”
American and JetBlue are defending themselves against a Department of Justice (DOJ) lawsuit seeking to unwind their “Northeast Alliance” (NEA), which was formed in 2020 to compete with Delta Air Lines and United Airlines in Boston and New York. DOJ lawyers argue the deal violates federal antitrust law, especially given JetBlue’s looming acquisition of Spirit.
Spirit’s shareholders are set to vote on 19 October about whether to approve JetBlue’s $3.8 billion bid to purchase ultra-low-cost Spirit. Approved by Spirit’s board of directors on 28 July, the deal calls for JetBlue to buy Spirit by the first half of 2024.
The federal trial, in US District Court for the District of Massachusetts, kicked off on 27 September.
On 29 September, Kirby testified that the NEA could expand and potentially encourage other major US airlines to form similar alliances, strangling competition. “I view this as opening Pandora’s box,” he says.
Meanwhile, DOJ attorneys argue the NEA will cost airline passengers hundreds of millions of dollars a year in higher fares. Under the agreement, the airlines will no longer “undercut” each other’s ticket prices, the DOJ says.
An airline attorney, however, says the NEA is ”all about serving customers, so there are more-frequent flights and more connections”.
The NEA is a code-share deal under which the airlines market and sell the other’s flights as their own, coordinate schedules and share some revenue.
On 27 September, DOJ attorneys represented the NEA as similar to what are commonly called airline “joint ventures”, which require regulatory approval from antitrust authorities. Joint ventures have been struck between US airlines and international carriers, and involve pricing coordination and revenue sharing.
JetBlue Airways chief executive Robin Hayes testified on the first day of the trial that “pricing coordination is absolutely not” part of the NEA.
With Vasu Raja, American’s chief financial officer – who oversaw negotiations of the NEA – taking the stand 30 September, the DOJ continued arguing that the NEA is more akin to a joint venture than a marketing partnership.
“The arrangement that American now has with JetBlue requires a lot more collaboration and coordination than a simple codeshare, correct?” asks a US government attorney.
“That’s true,” Raja concedes.
With the DOJ lawyer seeking to represent the economic interests of American and JetBlue as highly intertwined, Raja acknowledges the airlines joined forces against competitors. “We’re very much aligned in our incentives to get customers away from Delta,” he says.