Today, the United States District Court in Boston will begin the trial over the Northeast Alliance, a partnership formed by American Airlines and JetBlue just two years ago. The prosecution (United States Justice Department) will present its objections to the partnership in a trial that could last up to three weeks.
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Will the Northeast Alliance survive?
A case to investigate the Northeast Alliance had previously been opened, then closed by the previous president shortly before President Biden took office. The Biden administration reopened the case and signed an executive order that promised scrutiny in the airline industry, especially regarding mergers.
JetBlue has a stronger presence in the northeast, meaning that American Airlines has more to lose if the partnership is ended. Photo: Lukas Souza | Simple Flying
This trial in the District Court in Boston will be the perfect opportunity for the current administration to demonstrate its commitment to maintaining an appropriate level of competition in the aviation industry in the United States.
“This is a major test of Biden’s crusade against big business and corporate monopoly. Biden has staked his reputation on being a trust buster. They’ve certainly challenged a few lawsuits, and they’ve brought lawsuits against. But this would be a major victory if he manages to stop it.”- William Magnuson, Associate Law Professor, Texas A&M
Before arguing how the Northeast Alliance affected the national market, the prosecution will have to prove that the alliance formed between JetBlue and American hurt competition in New York and Boston. Because of the COVID-19 pandemic, it has been difficult to gauge the impact of the alliance on pricing and competition during the last two years.
The airlines’ lawyers argue that the Northeast Alliance generates more passenger options by creating a third competitor to United and Delta in the region. United has a hub in Newark (EWR), Delta has hubs in New York (JFK), and Boston (BOS), and American and JetBlue also have hubs at JFK and BOS.
Potential impact
Though American has hubs in New York and Boston, its presence is stronger in the Sunbelt. Meanwhile, JetBlue has a solid presence in the Northeast and on the East Coast. In theory, the partnership between the airlines fills in the gaps. But according to Attorney General Merrick Garland, one of the many AGs who have joined the suit, this partnership is, in essence, a merger between the two airlines in New York and Boston.
The District Court trial could set a precedent for future mergers, including the proposed merger between JetBlue and Spirit. Photo: Lukas Souza | Simple Flying
Analysts are watching the case because its impact could reach far beyond just American and JetBlue. The pending merger between JetBlue and Spirit could also be impacted. If the Northeast Alliance falls through, American Airlines has the most to lose because JetBlue will already gain a stronger foothold in the region if its merger with Spirit is approved.
The Spirit and JetBlue merger will not be a point of discussion during this trial, but its outcome may set a precedent for future mergers and partnerships in the United States. Darren Bush, a former antitrust lawyer in the government’s airline division and a current law professor at the University of Houston, thinks the DOJ dug its grave.
“The DOJ is its own worst enemy in this case because they are arguing that the industry is too consolidated after allowing consolidation for decades. This wouldn’t be as big of an issue if they didn’t let it get to this point in the first place.”
As updates on the trial become available, Simple Flying will continue to bring you the latest.
What do you think the outcome of the trial will be? Let us know in the comments below.
Source: simpleflying.com
