California Attorney General Rob Bonta Tuesday joined the U.S. Department of Justice and seven other attorneys general in filing a lawsuit involving Southern California airports against American Airlines and JetBlue — challenging what they call an anticompetitive joint venture between the companies known as the Northeast Alliance.
As part of the code- and profit-sharing venture, the airlines coordinate which routes to fly, when to fly them and how many seats to offer — effectively merging their operations in certain markets, according to the suit.
In California alone, this “anticompetitive” venture is expected to impact at least nine airports with flights to and from the East Coast and cost California consumers hundreds of millions of dollars, Bonta said.
In the lawsuit, filed in federal court in Massachusetts, the coalition argues that the Northeast Alliance is an unlawful agreement in violation of the federal Sherman Act.
“Fewer flights. More expensive tickets. Lower quality service. That’s what happens when one of the last shreds of real competition is eliminated from the market for air travel,” Bonta said.
“We’ve seen it happen before, and we won’t let it happen again. Plain and simple: American Airlines and JetBlue’s Northeast Alliance is anticompetitive and harmful to consumers nationwide. As the People’s Attorney, I am committed to fighting for a fair and competitive economy — and I won’t stand by when two of the largest U.S. airlines seek to merge their operations on some of the country’s most traveled routes.”
The Northeast Alliance covers all domestic American Airlines and JetBlue routes that begin or end in New York or Boston — routes comprising two-thirds of JetBlue’s business.
Along these routes, American Airlines and JetBlue will effectively function as a single carrier, the suit says.
Consumers saw the impact of airline consolidation on price and quality first-hand following the American-USAir merger and Alaska’s acquisition of Virgin America, the attorneys general say.
The coalition argues that the Northeast Alliance will have similar impacts, substantially increasing market concentration on high-traffic routes to and from Los Angeles, San Francisco and San Diego, as well as on routes to and from many smaller California airports, including Long Beach, Burbank, Ontario, and San Jose.
The loss of competition on these routes is expected to result in hundreds of millions of dollars in annual consumer harm, the AGs said.
According to the suit, the Alliance would be presumptively unlawful in over 100 markets where the parties now compete. It says eliminating the competition between them, which has resulted in substantial benefits to consumers, gives American Airlines and JetBlue the incentive to raise airfares, reduce capacity, and lower the quality of service.
The coalition further alleges that the Alliance’s revenue-sharing agreement will discourage the airlines from competing with each other on price because doing so would only serve to reduce the revenue each earns.
Instead, the Alliance enables American and JetBlue to raise fares by exiting markets or by agreeing to cut the number of available seats and then sharing in their partner’s profits, the coalition says.
As the complaint describes, the Alliance advances the trend in airline industry consolidation and capacity restriction by legacy carriers like American Airlines. It also halts JetBlue’s previous disruption of the industry through aggressive capacity expansion, fare reduction, innovation, and better quality of service, the AGs say.