American Airlines is America’s largest airline, transporting passengers safely from state to state and country to country. Meanwhile, JetBlue is the sixth-largest airline in America. Launched in 2021, this partnership allowed customers to earn airline miles for both airlines when flying on one of them.
The partnership featured two main components. First, American and JetBlue have code shared on certain flights in and out of four key Northeast airports in New York and Boston. The second was reciprocal loyalty benefits allowing members to earn points and miles on their different flights. This can go towards their rewards within respective loyalty programs when passengers take either airline’s flights, allowing both companies to provide competitive pricing and efficiency for their clientele.
American Airlines wanted to hold onto its partnership with JetBlue, so the company attempted to appeal the original decision made in May 2023. The first appeal was the summer of 2023, where American Airlines appealed to the courts, however not backed by JetBlue. JetBlue wanted to push ahead with the end of the partnership.
On Nov. 8, a judge decided that the U.S. Northeast partnership violated antitrust laws. The Court of Appeals for the First Circuit backed the original ruling that allowed two airlines to monopolize, raise prices and pool revenue. U.S. Circuit Judge William Kayatta, writing for a three-judge panel, said the trial judge had been “presented with an arrangement that had many of the essential attributes of an agreement between two powerful competitors sharing revenues and divvying up highly concentrated markets” (Reuters, Raymond, Shepardson). However, American Airlines argued that “The Northeast Alliance was designed to increase competition and expand customer options in the Northeast, which it clearly did during the time it was allowed to operate” (Reuters, Raymond, Shepardson).
The Justice Department argued that the alliance would most likely hurt consumers. This is because it has eliminated American Airlines inducement to lower prices. This can hurt other airlines since it will set American Airlines as a superior service and of higher quality. Thus, competitors will try to lower the prices, diminishing their ability to raise prices. This weakens businesses in the long run, possibly having to sacrifice quality to make up the deficit. This can force the other airlines to give up on one of their qualities that make them a brand, making the fatal error of lowering their prices to compete against “quality” pricing.
Although JetBlue concluded the alliance, trying to benefit from their $3.8 billion purchase of Spirit Airlines, the Justice Department challenged this as well.
With the loss of the appeal, it proves that the antitrust regulators will remain vigilant towards airline mergers and partnerships. Creating a legal precedent could block other airlines from pitching similar mergers or acquisitions, with a higher correlation if it involves two airlines operating in direct competition with a specific market. Finally, it sets the precedent for mergers to be considerate towards the welfare of the consumer. This is a historical moment on keeping the airline industry a consumer-based industry.
