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A federal judge just told American and JetBlue to undo the Northeast Alliance in 30 days

American Airlines and JetBlue Airways
The DOJ has won its lawsuit against American Airlines and JetBlue Airways' controversial Northeast Alliance.NYC Russ/Shutterstock
  • The US Department of Justice has won its antitrust lawsuit against JetBlue Airways and American Airlines.

  • Judge Leo Sorokin ruled the pair has 30 days to undo their powerful Northeast Alliance.

  • The decision comes as airlines gear up for a busy travel season plagued with high fares and busy skies.

It looks like the controversial partial union of JetBlue Airways and American Airlines may be over.

On Friday, the Department of Justice won its lawsuit against the two airlines, which have been engaged in a powerful Northeast Alliance since July 2020, CNBC reported.

According to the September 2021 lawsuit, the pair's strategic planning of flight routes and schedules — which has since further expanded — could have a negative impact on customers.

"By effectively absorbing JetBlue's operations in Boston and New York City, American can reduce investments not just in those cities, but also in other parts of its network where it otherwise would maintain or add service," the lawsuit read. "As a consequence, consumers across the country will have fewer options and pay higher fares."

JetBlue and American argued the partnership was necessary to compete with Delta Air Lines and United Airlines in the busy New York and Boston hubs: "We made it clear at trial that the Northeast Alliance has been a huge win for customers," JetBlue told Insider.

But, a federal judge determined the alliance violates antitrust laws.

"Whatever the benefits to American and JetBlue of becoming more powerful — in the Northeast generally or in their shared rivalry with Delta — such benefits arise from a naked agreement not to compete with one another," Judge Leo Sorokin wrote in his ruling. "Such a pact is just the sort of 'unreasonable restraint on trade' the Sherman Act was designed to prevent."

The Sherman Act of 1890 outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize," according to the Federal Trade Commission.

The decision noted that the alliance limited certain routes to one of the two airlines, forcing the other to exit.

"In short, they are dividing the NEA markets between themselves," the decision said.

According to Judge Sorokin, JetBlue and American have 30 days to undo their alliance, meaning they cannot work together to coordinate their fares or routes.

The carriers told Insider the decision is "disappointing" and "wrong," with Amercian saying "the Court's legal analysis is plainly incorrect and unprecedented for a joint venture like the Northeast Alliance."

Moreover, both continue to defend the alliance as a benefit to customers.

"Through the NEA, JetBlue has been able to significantly grow in constrained northeast airports, bringing the airline's low fares and great service to more routes than would have been possible otherwise," JetBlue told Insider.

The airlines can appeal and are likely to fight the ruling, according to CNBC.

"We are studying the judgment in full and evaluating our next steps as part of the legal process," JetBlue told Insider

The DOJ did not immediately respond to Insider's requests for comment.

The decision cannot come at a worse time as the busy summer travel season gets into full swing. Both airlines have already sold tickets, and the unraveling could cause a headache for JetBlue, American, and their customers.

JetBlue is also battling a separate antitrust lawsuit against the DOJ over its proposed merger with Spirit Airlines, a deal worth $3.8 billion and would allow JetBlue to become the fifth largest airline in the US.

Read the original article on Business Insider