BOSTON (CN) — The country’s largest airline is a predator that is co-opting its upstart rival JetBlue Airways so it can illegally reduce flights and jack up prices for consumers, the Justice Department told a federal judge Tuesday.
American Airlines “wiped out a competitor” and that will lead to “reduced options, higher fares and often worse service,” government lawyer William Jones told to U.S. District Judge Leo Sorokin in opening statements at an antitrust bench trial in Boston.
The government wants to halt a joint venture between the two carriers in Boston and New York that will cost customers “hundreds of millions of dollars a year” in higher ticket prices, according to William Matlock of the Massachusetts attorney general’s office, who represents six states that also joined the lawsuit.
But the government struggled with the fact that the joint venture has been operating for 18 months and there is apparently no evidence that consumers have actually been harmed.
“There is zero evidence that JetBlue has altered its pricing behavior at all,” said American Airlines’ lawyer Daniel Wall, of Latham & Watkins.
JetBlue’s lawyer, Richard Schwed of Shearman & Sterling, told Sorokin that the joint venture had already resulted in 50 new nonstop routes, extra capacity on 90 nonstop routes, 17 new international routes and 45 daily departures that have been upgraded to a better plane.
Wall took direct aim at the government’s case, arguing that the it was built entirely on an antitrust theory that was rejected last year by the Supreme Court as well as an extremely flawed report prepared by an economist.
The economist wrongly assumed that American and JetBlue had completely merged, Wall said, and then applied a “Rube Goldberg kind of logic” that was “wildly unrealistic” and led to “absurd” results — and even then, the economist could only get the results he did by falsely assuming that Newark Liberty Airport wasn’t part of the New York market.
“They want you to pretend that Newark Airport doesn’t exist,” Wall told Sorokin, after which he used the courtroom’s computer to search Google for flights to New York and immediately pulled up numerous flights to Newark.
After opening statements, the government called JetBlue’s CEO, Robin Hayes, as a witness. Justice Department lawyer John Davis spent hours throwing numerous punches, suggesting that JetBlue had done things that hurt consumers, but none of them landed.
The unflappable Hayes explained in his dry British manner that each of the actions was caused by the pandemic or by air traffic control problems.
Davis also cited numerous statements Hayes had made condemning American’s international joint ventures as anti-competitive, but Hayes calmly responded that they were anti-competitive because they were structured differently from JetBlue’s.
What came through in hours of testimony was Hayes’ utter disdain for the legacy carriers and their high-price business model, so the government might have shot itself in the foot by calling him as a lead witness — he didn’t seem at all to have been co-opted nor did he appear to want to raise fares.
The joint venture was announced in July 2020 as a way for American and JetBlue to better compete against Delta and United, the dominant carriers in the Boston and New York marketplaces. It was approved by the Department of Transportation after a six-month review and began operating in February 2021.
The two airlines are coordinating their schedules in the two cities as well as sharing revenue and offering reciprocal frequent flyer benefits.
The government’s theory is that American is threatened by JetBlue’s low-cost model and is trying to co-opt it to prevent competition, especially in Boston and New York which account for two-thirds of JetBlue’s business.
