First Circuit cancels flight on JetBlue-American partnership

BOSTON (CN) — A joint venture between American Airlines and JetBlue Airways in Boston and New York was grounded by the First Circuit Friday as a violation of antitrust laws.

The two carriers announced their partnership in July 2020 as a way to compete more effectively against Delta Air Lines and United Airlines, the dominant carriers in the Boston and New York markets. It was approved by the Department of Transportation and began operating in February 2021.

Although the airlines didn’t collaborate on ticket prices, they coordinated their schedules in the two cities, shared revenue and offered reciprocal frequent-flyer benefits.

But the partnership “led to decreased capacity, lower frequencies, or reduced consumer choices on multiple routes, including some that are heavily traveled,” U.S. Circuit Judge William Kayatta wrote in a 35-page decision Friday. The three-judge panel affirmed U.S. District Judge Leo Sorokin’s May 2023 finding that the partnership violated federal antitrust law.

The Department of Justice has been eager to stop consolidation in the airline industry, where four carriers control more than 80% of the domestic market. In January the government persuaded a different judge to block JetBlue’s acquisition of Spirit Airlines on antitrust grounds.

In the Boston and New York case, the key issue was whether the joint venture harmed competition. Sorokin said the venture obviously harmed competition because it reduced the number of competing airlines and curbed JetBlue’s “maverick” status in the industry. Despite a seven-week trial, the judge wrote that the question could be decided “in the twinkling of an eye” because “no deep and searching analysis is required.”

“American argues that the [joint venture] actually resulted in increased capacity in the form of ‘more flights, more seats, more routes, shorter connections, better frequent flyer benefits, and more choices.’ But the district court expressly rejected as unreliable the evidence American offers in support of these claims,” Kayatta said, and there was no good reason to overturn those findings.

The Barack Obama appointee added, “The mere fact that airline capacity overall increased between 2021 and 2022 — just as the industry began to recover from the Covid-19 pandemic — did little to show that the [joint venture] itself increased American or JetBlue’s capacity in any meaningful way.”

Although the partnership might have had some benefits to competition, Kayatta said, the same result could have been achieved with a much more limited arrangement similar to a recent agreement between American and Alaska Airlines.

The opinion was joined by U.S. Circuit Judge David Barron, another Obama appointee, and U.S. Circuit Judge Gustavo Gelpí, who was appointed by Joe Biden.