By Nate Raymond (NS:) and David Shepardson
(Reuters) -A U.S. appeals court on Friday held that a trial judge correctly found that American Airlines (NASDAQ:)’ now-scrapped U.S. Northeast partnership with JetBlue Airways (NASDAQ:) violated federal antitrust law.
Siding with the U.S. Department of Justice, the Boston-based 1st U.S. Circuit Court of Appeals affirmed a trial judge’s ruling blocking the airlines’ “Northeast Alliance,” which had allowed the two carriers to coordinate flights 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.”
He said the judge, Leo Sorokin, following a non-jury trial had in May 2023 issued a ruling with “detailed findings of fact, many key ones of which were unfavorable to American,” and none of which were clearly wrongly legally analyzed.
U.S. Attorney General Merrick Garland in a statement called the ruling “a hard-won victory for the millions of Americans who count on competition between airlines to fly affordably, whether to visit family, to go on vacation, or to travel for business.”
Fort Worth, Texas-based American Airlines in a statement said it disagreed with the decision and was considering its options. It could either ask the 1st Circuit to reconsider the ruling or pursue an appeal at the U.S. Supreme Court.
“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,” American Airlines said.
The alliance was announced in July 2020 and approved by the U.S. Transportation Department just days before the end of Republican President-elect Donald Trump’s first administration in January 2021.
The new Trump administration is expected to be much more open to mergers and partnerships than the outgoing administration of Democratic President Joe Biden, whose Justice Department sued to block the alliance in September 2021 along with six states.
Through their partnership, American, the nation’s largest airline, and JetBlue, the sixth-largest, joined forces for flights in and out of New York City and Boston, coordinating schedules and pooling revenue.
The Justice Department argued that the alliance would hurt consumers, saying the partnership eliminated incentives for American to cut prices to lure customers from JetBlue, a historically disruptive rival with often lower fares.
Following Sorokin’s ruling, JetBlue terminated the alliance, as it unsuccessfully sought to bolster its efforts to win approval for the now-dropped $3.8-billion purchase of Spirit Airlines (NYSE:), which the Justice Department also challenged.
American Airlines, though, pressed ahead with an appeal, saying the ruling would prevent the company from entering into any similar future arrangement, including with JetBlue.
