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US, Massachusetts sue American Airlines, JetBlue over deal that could mean fewer flights, higher costs out of Logan

The US government, Massachusetts, several other states and the District of Columbia today filed an anti-trust suit against American and JetBlue - Logan's largest airline - alleging that a route-sharing deal between them will dramatically limit consumer choice and raise the cost of flying to and from Logan and New York-area airports.

In their suit, filed in US District Court in Boston, the US and the states charge:

Under their so-called “Northeast Alliance,” the two rivals have quietly agreed to share their revenues and coordinate which routes to fly, when to fly them, who will fly them, and what size planes to use on flights to and from four major airports: Boston Logan International Airport, John F. Kennedy International Airport, LaGuardia Airport, and Newark Liberty International Airport. By consolidating their businesses in this way, American and JetBlue will effectively merge their operations on flights to and from the four airports—which collectively account for two thirds of JetBlue's business. In so doing, the Northeast 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. 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. The United States and Plaintiff States bring this action to prevent the hundreds of millions of dollars in harm to consumers that will occur if these two rivals are permitted to maintain this modern-day version of a nineteenth-century business trust.

The suit details the particular impact JetBlue has had on fares to and from Logan over the past 15 years - and so the potential effect from eliminating it as a competitor:

JetBlue's reputation for lowering fares is so well known in the airline industry that it has earned a name: the "JetBlue Effect." JetBlue's record in Boston and New York City illustrates why. Since launching service at Boston Logan in 2004, JetBlue has challenged the major airlines—including American—by offering lower fares and better service. Consumers voted with their feet. JetBlue became Boston's leading airline, offering more flights out of Boston than any other airline. What's more, JetBlue forced American and other airlines that serve Boston to lower their fares as well. This competition has resulted in substantial savings for consumers. In 2019, JetBlue estimated that it had saved consumers flying to and from Boston more than $3 billion since it started serving the airport in 2004. JetBlue has had a similar effect in New York City. In a presentation titled "16 Years of Disrupting the Industry," JetBlue explained that "there's no question we are a disruptor. There's no better example of how we've influenced change than at our home at JFK Airport."

Before entering into the Northeast Alliance, American and JetBlue were poised to compete even more intensively. Having fallen significantly behind JetBlue in Boston, American had vowed to "win BOS back" by adding routes, increasing capacity on existing flights, and obtaining new gates. Likewise, JetBlue had announced more flights to and from Boston. JetBlue was also pursuing opportunities to expand in New York City, and considering expansion at American strongholds like Philadelphia, Miami, and Los Angeles. As a JetBlue network planning executive explained in June 2020, "one of the most common trends in JetBlue's 20 year history is easily stealing share from AA [American] and eventually winning. So that applies to PHL [Philadelphia] and MIA [Miami]."

JetBlue had also announced plans to launch its first transatlantic flight, from New York to London, and publicly touted plans to further expand service to Europe, in what promised to be the most significant challenge to the three global alliances' stranglehold in those markets. "These fares are obscene—they are obscene—and they should not be permitted to exist," JetBlue's CEO said of the legacy airlines' transatlantic service in 2019. "[F]or a low-cost carrier to come in and discipline the market, lower fares, create more availability, I think that's a good thing." Indeed, American executives feared the impact that JetBlue's new transatlantic service would have on fares. On flights between Boston and London Heathrow, for example, American worried internally about a "50-60% fare drop in BOSLON once B6 [JetBlue] starts non-stop service."

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Comments

Not sure what took so long, since JetBlue & AA announced this 'alliance' in summer 2020, but agreement would allow backroom deals where airline #1 says to airline #2, you take these cities and I'll take these others. The end result is that the passenger loses with higher fares AND worse flight schedules.

I hope everyone has a long memory on how awful the major airlines have been during covid. We gave them a completely unprecedented $50 billion dollars of covid relief so they wouldn't lay-off employees and would keep planes flying, as it was designated essential. And what did they do as a thank you to the taxpayers? They announced expiration dates of airline credits for flights shut down during covid, cancellation of flights hours before takeoff and then wouldn't re-book customers on rescheduled flights until days later. We need an airline bill of rights like Europe badly!

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This sounds interesting, do you know where I can read more about this Bill of Rights?

REGULATION (EC) No 261/2004 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 11 February 2004
establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91

last few years working for a european company has made me aware (and jealous) of this. Its pretty nifty and gets used often. Swede friends of mine just got a refund for such a bad flight with several delays.

https://en.wikipedia.org/wiki/Flight_Compensation_Regulation

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Im surprised to not see the world collusion put into everything other sentence since that's what it is.

On the one hand, competition keeps fares down.

On the other, it leads to duplicated flights to the same places, which is bad for the environment. And a coordinated schedule can be more convenient for passengers than one where each airline has a flight to the same place around the same time.

Of course if we had real high-speed rail, with frequent schedules, affordable tickets, and a full network of destinations rather than just one line (i.e. everything the Acela isn't), there would be much less need for all the flights between Boston, New York, and DC.

… when I saw “fewer flights” I saw a silver lining.
Less planes overhead would be a good thing for Boston.

Granted, this is a separate issue and not the best way to go about resolving it.

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We need to go after more companies for monopolies. Amazon I am looking at you.

What does Amazon sell that you can't get somewhere else?