JetBlue has taken the “difficult decision” not to appeal the May 19 Court ruling that summoned the airline and American Airlines to dissolve their Northeast Alliance (NEA). Instead, JetBlue has initiated the winding down of the partnership, which it expects to complete over the coming months, the carrier said in a statement on July 5. JetBlue pulls the plug on the Northeast Alliance.
The decision comes as a surprise, as American CEO Robert Isom said in May that his airline intended to appeal the ruling from the United States District Court in Massachusetts. The case was initiated by the Department of Justice (DOJ), which raised serious concerns about the effects that the NEA would have on competition in the New York and Boston areas.
The District Court ruled in favor of the DOJ, stating on May 19 that the NEA resembles a merger between American and JetBlue where the two airlines no longer compete. This seriously diminishes competition for consumers, “and substantially upsets the competitive balance in a highly concentrated industry, not only on a single overlap route or a handful of O&Ds, but throughout the northeast and beyond.”
Deep conviction
JetBlue has remained silent about an appeal, until today. In Wednesday’s statement, the airline upholds its claim that the NEA has been beneficial for competition: “Customers benefitted from more of JetBlue’s low-fare, high-quality service than ever. We’ve increased capacity, added new routes and destinations, brought down fares, provided JetBlue-American flight connections that are a real alternative to Delta and United, and expanded the value of our loyalty program benefits to customers.”
The statement continued: “Despite our deep conviction in the procompetitive benefits of the NEA, after much consideration, JetBlue has made the difficult decision not to appeal the court’s determination that the NEA cannot continue as currently crafted, and has instead initiated the termination of the NEA, beginning a wind-down process that will take place over the coming months.”
The Court ruling summoned American and JetBlue to dissolve NEA within 30 days until June 19.
Saving the Spirit deal
While the statement offers no further explanation as to why JetBlue will not appeal, one obvious reason can be found in the next paragraph: the proposed acquisition of Spirit Airlines. JetBlue wants to dedicate all time and energy to secure this deal as this will “turbocharge” its growth. The deal, which followed after a long and hard battle to convince Spirit’s shareholders, has also been appealed by the DOJ for the same reasons of being anti-competitive.
“We will now turn even more focus to our proposed combination with Spirit, which is the best and most effective opportunity to truly transform the competitive landscape in the U.S. and bring the JetBlue Effect to more routes and markets across the country,” JetBlue says in its statement.
The carrier already makes its position clear when it comes to the upcoming court case for the Spirit-JetBlue case. “As it relates to the Spirit combination, terminating the NEA renders the US Department of Justice’s (DOJ) concerns about our partnership with a legacy carrier entirely moot. With that, the DOJ should reconsider and support our plan to bring a national low-fare competitor to the Big Four; the flying public deserves better than the status quo. The DOJ itself has acknowledged the benefits of JetBlue’s disruptive impact on the industry, and we are open to working with the DOJ to address any remaining concerns they have.”
American’s response
Responding to JetBlue’s decision not to appeal the NEA ruling, American Airlines released its own statement:
“We, of course, respect JetBlue’s decision to focus on its other antitrust and regulatory challenges. At the same time, JetBlue’s decision and reasoning confirm our belief that the NEA has been highly pro-competitive and that an erroneous judicial decision disregarding the NEA’s consumer benefits has led to an anti-competitive outcome.”
“American will therefore move forward with an appeal. JetBlue has been a great partner, and we will continue to work with them to ensure our mutual customers can travel seamlessly without disruption to their travel plans.”
What American expects to get from an appeal in which its partner no longer participates, is unclear.
