American, JetBlue Spar With Justice Department as Antitrust Trial Winds Down

American, the world’s largest airline, and JetBlue agreed to their Northeast Alliance in 2020, working together at three New York-area airports and in Boston. They sell seats on one another’s’ flights along certain routes, coordinate schedules and share revenue from flights within the scope of the partnership.

The department, along with six states and the District of Columbia, filed an antitrust suit against the alliance last year, alleging it has eroded competition and will lead to higher airfares for fliers. The chief executives of American and JetBlue, along with other senior executives from those airlines and their rivals, testified in Boston over the course of the trial, which began in late September.

“The defendants’ argument is that bigger is better,” Justice Department lawyer

William Jones

said as he delivered the government’s closing argument Friday before Judge

Leo Sorokin,

who will decide the case. “But getting bigger through cooperating and collaborating rather than competing, Your Honor, isn’t better. It’s just a shortcut. And consumers pay a price for that shortcut.”

Attorneys for the airlines countered in their closing arguments that the alliance has been good for consumers.

“This is a case about a manifestly pro-competitive venture that makes these markets more competitive than they otherwise were,” said

Dan Wall,

a lawyer for American, adding that the department could still challenge the arrangement later if it eventually proved to be harmful. “If we’re wrong and time proves otherwise, the antitrust laws are going to still be there,” he said.

Judge Sorokin, who oversaw the trial, said Friday he would review the evidence and would schedule a hearing to ask additional questions as quickly as he is able to.

The suit is part of the Biden administration’s broader push to more aggressively challenge corporate deals it believes will suppress competition. That effort has had mixed results. Antitrust enforcers lost cases in the healthcare and agriculture industries this year. Last month, a federal judge blocked Penguin Random House from acquiring rival publisher Simon & Schuster, a deal that the Justice Department had argued would reduce competition in the market for U.S. publishing rights and harm writers.

The department has argued that the structure of the American-JetBlue partnership gives the airlines an incentive to reduce capacity and drive up fares along routes where the Justice Department has said they now face limited competition, and department officials have estimated that the alliance will cost consumers close to $700 million a year. Mr. Jones said the alliance is particularly problematic in Boston, where JetBlue had already established itself as a dominant carrier.

The department also argued that allowing the Northeast Alliance to stand could pave the way for similar deals among other airlines, something that would bring more capacity under the control of the bigger airlines that already dominate the industry in the U.S. following a series of mergers. Mr. Jones said that JetBlue’s deal to acquire

Spirit Airlines Inc.,

agreed to in July, would drive even more consolidation if it is allowed to proceed.

Instead, the department has argued it would be better if JetBlue and American engaged in more limited cooperation—similar to an arrangement American has with

Alaska Air Group Inc.

on the West Coast—and if American leased some of its slots in congested New York airports to JetBlue.

Lawyers for American and JetBlue said the government’s conclusions are wrong, and that its estimate of the cost to consumers rests on flawed analysis. The airlines have said that their alliance hasn’t caused fare increases or reductions in flying capacity in the more than 18 months it has been in place.

American had fallen behind rivals at New York airports, executives have said, and JetBlue executives testified during the trial that they weren’t able to secure takeoff and landing slots to add flights there. At the same time, JetBlue was losing ground to Delta in Boston, JetBlue has said.

Working together has allowed JetBlue and American to fly larger planes and add flights from the northeast hubs to new destinations, facilitating expansion that wouldn’t have been possible for either airline on its own, the airlines have said. In Boston, fares have fallen by 12% on nonstop routes where the airlines overlap since the alliance went into effect, Mr. Wall told the court.

Write to Alison Sider at [email protected]