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Justice Department Seeks To End JetBlue Partnership With American

Justice Department Seeks To End JetBlue Partnership With American

Back in July 2021, President Biden instructed government agencies to begin more rigorously enforcing perceived antitrust violations (i.e., buying up rival businesses in order to have a monopoly on an industry) in order to spur more competition and to prevent a rise in consumer prices. 

“Robust competition is critical to preserving America’s role as the world’s leading economy,” stated the order. “Yet over the last several decades, as industries have consolidated, competition has weakened in too many markets, denying Americans the benefits of an open economy and widening racial, income, and wealth inequality.”

Per The New York Times, “the president has stacked his administration with crusaders who have spent their careers challenging corporate consolidation.”

At first, the move was largely seen as primarily, if unofficially, directed at online behemoths such as Amazon  (AMZN) , Google  (GOOG)  and Facebook  (META)

Of course, as one might expect, companies accused of alleged antitrust violations, are quick to argue that they are engaging in no such practice, as Mark Zuckerberg, CEO of the company now known as Meta, often argued his companies has plenty of rivals in the social media world, including TikTok and Twitter  (TWTR) .

Internet giants are still under a great deal of government scrutiny, as earlier this year a Federal Judge ruled the Federal Trade Commission can move forward with an antitrust suit against Meta. But they’re not the only industry that is currently feeling the heat, as the Justice Department also has its eye on the aviation industry at the moment.

 Airline Industry AntiTrust Probe

For the past year-and-a-half, American Airlines  (AAL)  and JetBlue Airways  (JBLU)  have had a partnership, in which the two parties coordinated schedules, shared revenue from flights in the Northeast, and also sell seats on each other’s planes.

Last September, the Justice Department, along with the attorneys general of six states and the District of Columbia sued to block the partnership. And now, the government is trying to persuade a federal judge to end it partnership.

The Justice Department alleges that the alliance is a merger in-all-but name that costs $700 million a year in higher fares.

The alliance “will eliminate significant competition between American and JetBlue that has led to lower fares and higher quality service for consumers traveling to and from those airports,” the Justice Department’s suit alleges. “It will also closely tie JetBlue’s fate to that of American, diminishing JetBlue’s incentives to compete with American in markets across the country.”

JetBlue CEO Defends The Company

In a brief, American and JetBlue, retorted that there is no evidence that consumers have been harmed by the alliance, and that it enables them to expand in capacity-constrained airports where they wouldn’t be able to on their own.

JetBlue CEO Robin Hayes was the first witness in the trial, which took place in Boston federal court. He defended the pact as “pro-consumer.” 

The Justice Department is also currently investigating JetBlue over a potential $3.8 billion purchase of Spirit, which the company in a statement said would make it a “national low-fare challenger to the dominant big four airlines.”

But as Jones said, such a merger would only decrease competition, noting “it stands potentially to get worse with JetBlue’s announced acquisition of Spirit Airlines.” 

Written by Andrea Davies