Yesterday the United States Department of Justice began an antitrust trial to unwind the Northeast Alliance formed by JetBlue and American Airlines. The trial is being held at the United States District Court in Boston and may last up to three weeks.
Today, the first witness of the trial was called to the stand, JetBlue Chief Executive Robin Hayes. Lawyers from the president’s administration, six states, and the District of Columbia urged the judge to break up the alliance.
On the stand, Hayes shut down a suggestion from one of the DOJ lawyers that what American Airlines got from the partnership “was JetBlue in their pocket.” This was about a phrase that Hayes had used in a text message discussing a previously proposed partnership that American had failed to secure.
Robin Hayes was the first witness called in the Northeast Alliance trial. Photo: Getty Images
Though it was said that the Spirit-JetBlue merger would not affect the trial, the very first day of the trial had discussions about the proposed merger. Justice Department attorney John Davis pressed Hayes, asking if competition with Spirit forced JetBlue to lower its fare prices. Hayes did not answer the question but finally said,
“Sometimes we will react to what they’re doing. Sometimes they will react to what we’re doing.”
The Justice Department’s team also pressed Hayes about statements in which he criticized joint ventures involving other airlines. Hayes was also asked about a comment made in 2019 where he said that the airline industry had never been so concentrated and that the results were higher fares and poor service. Hayes criticized regulators for not imposing enough limits on those deals and said that the Northeast Alliance was different because the airlines do not coordinate on setting prices.
The lead attorney for the DOJ, William Jones, said,
“We know how the story ends. Rather than continuing to slug it out, American and JetBlue decided to collaborate rather than to continue competing.”
Is there evidence for the DOJ’s case?
Lawyers for JetBlue and American argued that the government has not been able to present a single piece of evidence showing that the Northeast Alliance has harmed passengers or resulted in more expensive airfare. The team even added that through the alliance, 50 routes have been added which compete with Delta and United. According to the airlines’ defense team, the lawsuit from the DOJ was premature.
“Most cases don’t get brought until there is some tangible evidence that the practices are doing harm.” – Daniel Wall, Attorney, leader for American’s defense
Wall argued against the DOJ’s claims that airline mergers have led to price hikes in airfare over the last 25 years. DOT data from Q1 shows that the national average fare declined 36% over the previous 20 years and 29% in the last ten years. Though large mergers have occurred, low-cost airlines have been able to drive down the average price of airfare.
Low-cost airlines like Frontier have been able to keep airfare down in the midst of large airline mergers. Photo: Lukas Souza | Simple Flying
The DOJ’s lawyers plan to call an economist from Georgetown University to testify that the Northeast Alliance will reduce competition in the United States and cost passengers an extra $700 million annually.