The Department of Justice filed an anti-trust suit against two major airlines on Tuesday. According to the DOJ, American Airlines and JetBlue created an alliance that allowed them to reduce choices for air passengers and raise prices.
The Justice Department declared that “This sweeping partnership is unprecedented among domestic airlines and amounts to a de facto merger”.
JetBlue and American Airlines created the Northeast Alliance last year. Their alliance operates in four major airports in Boston and New York City.
According to the DOJ’s anti-trust suit, the “de facto merger” doesn’t incentivize the airlines to compete. The DOJ argues that the Northeast Alliance caused “hundreds of millions of dollars in harm to air passengers”. The alliance, according to the DOJ, resulted in higher fares and fewer options for consumers.
The DOJ also alleges that the companies traded information. This includes which routes to fly, when to fly, and also the size of planes that will be used by which company. Acting Assistant Attorney General Richard Powers of the Justice Department’s Anti-Trust Division said that the department “cannot allow American Airlines to further consolidate the airline industry where competition is already in critical shortage”.
Consumers Are Better Off if American And JetBlue Are Competitors
Powers said that the consumers will be “better off if American and JetBlue continue to be fierce competitors, not allies”.
American Airline chief executive Doug Parker said in a statement that “Ironically, the Department of Justice’s lawsuit seeks to take away consumer choice and inhibit competition, not encourage it”. American Airlines’ lawyer said that the carrier “feels confident” that the lawsuit will not find any evidence that will show the alliance harming consumers.
On the other hand, JetBlue CEO Robin Hayes denied the alliance as a merger. Hayes stressed their commitment to “competition and low fares remains as strong as ever”. He said that “we have two different business models and are not working together on pricing”. Hayes added that “It’s also important that you have the full picture on benefits the (Northeast Alliance) is already delivering”.