The Department of Justice (DOJ) recently announced that it is suing two of the major airlines yesterday, stating that the companies in question have created an “alliance” that allowed them to raise prices and create less choices for air passengers traveling to and from locations in certain regions of the United States, specifically the Northeast. The two airlines in question, JetBlue and American Airlines, had created the “Northeast Alliance” that operates out of four major airports in Northeastern United States just last year.
“The department cannot allow American Airlines to further consolidate the airline industry where competition is already in a critical shortage,” the Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division said to reporters recently.
American Airlines is currently the largest airline in the world that, followed by Delta Airlines, United, and Southwest, and those four airlines account for over 80% of domestic air travel in the United States, according to reports from the DOJ. Before this alliance was created, JetBlue was a major competitor of American Airlines at Northeastern airports for years.
The DOJ alleges that the two major airlines had been trading information on which routes to fly, when to fly these routes, who would fly them, and what size planes to use for each flight. The DOJ also alleged that the two airlines have shared revenues earned at Northeastern airports, which destroys their incentives to compete with one another. On top of this, the “Northeast Alliance” allowed the parties to pool their gates and takeoff/landing authorizations, commonly referred to as “slots”, the DOJ has reported.
“This is not at all like a merger with American — we have two different business models and are not working together on pricing,” JetBlue CEO Robin Hayes stated recently. “It’s also important that you have the full picture on benefits the [Northeast Alliance] is already delivering, and I want to reassure you that the DOJ’s action will not affect our plans to continue implementing the [Northeast Alliance].”
Source: Brookfield Brief