At the end of the Trump administration, the Department of Transportation entered into an agreement allowing American Airlines and JetBlue to coordinate schedules and share revenue in the Northeast.
- American and JetBlue were the third and fourth largest airlines in New York. This combination would make them a viable competitor to the two largest players, United and Delta.
- In exchange, they’d have to give up slots in New York and DC, and they would have to grow total seat capacity. That means bigger planes. And more supply of seats, all else constant, means lower prices.
However the Biden administration took a different view and reversed positions. Its Department of Justice sued to break up the partnership, which had already begun. And they drew a judge who agreed with them.
The judge’s decision, rather than considering whether consumers would benefit overall, looked at individual markets and saw fare increases – when fares were rising everywhere due to inflation, supply chain issues and strong demand. The judge discounted expert witnesses for the airlines because they were working with airline data while giving weight to government experts. And the judge argued that the combination was per se illegal, since it reduced competitors, rather than looking at its effects to see more actual competition.
This despite the opinion itself observing that American Airlines was effectively planning to exit the New York market and lease its slots to JetBlue before building this partnership, because none of the strategies it had tried there made money – it found itself too small of a player in the market. By partnering with JetBlue they could use limited slots effectively, with American ramping up international service and JetBlue providing domestic feed, all while giving consumers the benefits of both.
Yet the two airlines have been strangely muted since the decision. They put out initial statements suggesting they disagreed with the decision. Then crickets.
- There are two separate defendants here, JetBlue and American, and together they needed to figure out a path forward.
- JetBlue is trying to buy Spirit Airlines, and the Biden administration opposes that too. JetBlue may have been trying to figure out if they could salvage the Spirit deal by walking away from this one.
Finally, though, American Airlines CEO Robert Isom spoke at the Bernstein Strategic Decisions Conference on Wednesday afternoon and said they’re going to appeal the decision which means figuring out how to deal with the continued partnership in the interim.
The good news for customers is this isn’t dead yet. It’s also good news for the rule of law, if the courts ultimately don’t allow the federal government to allow a deal to move forward and then let a mere change in administrations upend it, because those subject to the law should be able to rely on its consistency. It would be bad news, of course, for Delta who prefers to see its place in New York unchallenged by competition.
Legal appeals are driven by an allegation that the law at stake in the case was misinterpreted.
Given that no two US airlines have EVER been given domestic antitrust immunity, AAL is going to come up very short arguing that anything was misinterpreted.
And if JBLU doesn’t want to appeal – which they haven’t said they will – then AAL can’t force the case w/o JBLU.
it was always obvious that AAL needed the NEA more than JBLU.
JBLU needs a merger more now and is very likely not going to further delay its merger so it can fight for an agreement that has already been once defeated.
@Tim Dunn “Given that no two US airlines have EVER been given domestic antitrust immunity, AAL is going to come up very short arguing that anything was misinterpreted.”
Completely irrelevant, airlines have been allowed to do far more than receive antitrust immunity for a limited set of activities, they’ve been allowed to fully merge. Regardless, that history is irrelevant to whether or not there’s reversible error if that’s what you are getting at.
Now, where you are correct is that JetBlue hasn’t said THEY will appeal! No statement from JetBlue on this yet! But the only reason for them not to appeal is if dropping the AA deal helps them secure the Spirit acquisition, if DOJ is willing to settle on Spirit if they walk away from AA.
At the end of the day the courts can interpret anti-trust law, which is a big old mess. But the question of what’s good for competition and consumers if much clearer. AA+B6 is bad for Delta, good for customers, and without the NEA, AA isn’t a viable competitor in New York at all.
Gary,
AA and B6 COULD file a request for a merger only for it to be denied.
The NEA was all about skirting a full DOJ review of a merger so AAL concocted the idea of a geographically limited merger – and the DOJ shot it down.
There is no such thing as a partial merger – either AA attempts to merge completely with B6 or they must remain as competitors.
It is absolutely relevant that AA and B6 did something that no other 2 US airlines ever received permission to do. The only other option was a full-on merger – and that would have been easily denied – just as the NEA will be.
The issue is that AA doesn’t have a viable backup plan to be relevant in NYC and the NE and will fight as long as anyone will listen.
And given that B6 owed AA $200 million just for one reporting period, there is not a whole lot of reason to believe the agreement was mutually beneficial to both partners anyway.
@Tim Dunn – why do you keep repeating the falsehood that no two U.S. airlines have ever been granted antitrust immunity covering domestic routes?
Gary,
If I may respectfully dissent on the “rule of law” point–I am not a lawyer but wouldn’t the AA-Jetblue alliance be illegal under the Sherman Antitrust act or other antitrust laws on the books?
That said, I fully grant you that the laws haven’t been enforced this way for the past 40-50 years so either way there’s a lack of consistency IMHO.
@Nick @ PFD – my point is that a person or business should be able to rely on the federal government approving an action, and not fear they will reverse course simply because some other person comes to power. The difference is rule of law vs rule of men. There was no new information when the Biden administration decided to sue to upend an arrangement that got underway after the parties actually entered into a settlement to approve it.
As far as the Sherman Antitrust Act, it’s wholly problematic from a rule of law perspective. As they say about antitrust…
* if your prices are too high, that’s monopoly pricing
* if your prices are too low, that’s predatory pricing
* if your prices are the same as competitors, that’s collusion
😀
Gary,
feel free to let us know what 2 airlines in the deregulated era have been granted antitrust immunity to cooperate on domestic routes.
@Gary and Tim
What if none of that matters, let’s say Tim is correct and AA/B6 knows the righting is on the wall. What if this is just a “Hail Mary” ruse just to obtain a stay or injunction (sorry not a lawyer) to obtain more than 30 days (now 3 weeks right?) to spool down the codeshare in a more orderly fashion, then when they are in a bit more comfortable position withdraw the appeal. In otherwords could this just be a “delaying action” to facilitate a more orderly retreat from a loosing battle?
More of Gary’s dime-store lawyering. For amusement purposes only.
AA’s own testimony which became public at trial proved it knew that the construct of the NEA was legally problematic, they could have done the same thing as they did with AS, but they chose the legally riskier route and got swatted for it.
Yes, AA is just trying to delay the inevitable = but it doesn’t change that you don’t just file paperwork and then drag out the process, only to give up later – unless your law dept. wants to be the laughingstock of the industry for decades to come.
AA has to have a legitimate legal reason to appeal. Given that no two US airlines have ever had antitrust immunity to cooperate on domestic routes since the industry was deregulated, there is no basis for arguing that the judge got it wrong.
B6 has bigger fish to fry. AA is clearly unable to recognize that it screwed up its future in the NE step by step over decades. They can’t get back what they wish they once had.
Same thing is true of United at JFK.
You live with the consequences of decisions that were made, even if they weren’t your own.
@Tim Dunn – “feel free to let us know what 2 airlines in the deregulated era have been granted antitrust immunity to cooperate on domestic routes”
Aloha and Hawaiian were granted anti-trust immunity in 2002. A little evening reading for you, here’s the DOT order:
https://viewfromthewing.com/wp-content/uploads/2023/05/aloha-hawaiian.pdf
What?? “good news for customers is this isn’t dead yet” ? How can less competition in New York be good news for customers? Stupid!
@greg it is more competition, not less. AA wasn’t a competitor before this, and was even going to walk away and lease out its slots. This deal created a third competitor against Delta.and United.
Gary,
first, the DOJ granted antitrust immunity on an INTRASTATE basis – not interstate as AAL and JBLU have – for a few more weeks – because the Hawaii governor thought it was necessary to do so.
The agreement was for a limited time period POST 9/11.
Second, both were tidbit airlines in the scope of the US airline industry.
Hawaiian is still a fraction of the size of JetBlue – and Hawaiian is still in dire financial shape – in part due to Southwest.
My statement that no domestic airlines have been granted antitrust immunity still stands. Finding a very limited time, intrastate exception doesn’t negate my statement.
and you still cling to the notion that it is ok to violate antitrust law in order to create a larger competitor and the law has never allowed that.
btw, the transcript and recording of the AA exec comments at the Bernstein conference about the NEA are available on Seeking Alpha.
Nice of you to add so many caveats, Tim.
You should simply apologize to Gary for being wrong here.
I owe nobody an apology.
the document that Gary cited specifically said it was for intrastate transportation only.
AA and B6 don’t have an intrastate only agreement and neither does any other US airlines.
And the HA/AQ agreement was VERY TEMPORARY post 9/11.
My original statement stands.
None of which changes that Gary still can’t accept that the NEA is dead – no matter how hard Gary or anyone else wants to yell otherwise.
The logic of consumer benefit escapes me. You have an already-concentrated market which gives the top players non-competitive pricing power. You argue that combining the third and fourth players in a highly concentrated market benefits consumers because they are a stronger competitor to number one — ignoring the fact that you now have three players instead of four — and that’s in greater NY. For LGA and JFK, you’re combining 1 or 2 and 3. And in Boston, you have number 1 and 3 combining! The increase in market power to set prices is obvious and was pointed to by the court. The DOJ/FTC took action just a couple of years ago to stop the number 1 and 4 title insurers from merging because instead of 4 title insurers controlling 80% of the market, you would have 3. This is text book anti-competitive behavior. The efficiency standard used to approve a variety of mergers and acquisitions in the past two decades has shown to be erroneous — the short term efficiencies are wiped out by the increases in market power of the fewer remaining players. And the rule of man vs. rule of law argument also doesn’t fly. Each administration feels free to change what a prior administration has done, except in this case, you have antitrust regulators who actually believe it is their job to promote competition and protect consumers.
Ugh obviously some people need to start their own blog if everything on other people’s blogs (including everything other readers write) is always wrong.
But I guess starting a new blog isn’t as satisfying as being a nonstop contrarian on an existing blog.
if Gary didn’t want comments, he would turn them off.
He is far from always wrong. He knows exactly what will evoke a response and he engages with his readers.
I create traffic for his blog – on top of enjoying discussing/debating with him.
I’d have coffee with him tomorrow if we were in the same city.
Discussion and debate are hardly the basis of animosity
“@greg it is more competition, not less. AA wasn’t a competitor before this, and was even going to walk away and lease out its slots.”
Gary: what’s your evidence for this? As a BOS customer, I can tell you that the NEA ruined competition in my market. Before it, both AA & B6 flew multiple daily flights from BOS to BUF, PIT, LGA, CLE. After it was implemented, AA immedately removed ALL flights to these routes. Predictably, prices shot up and the reduced number of nonstop flights (also meaning reduced flight times) sucks for passengers.
It’s weird to me how much you love the NEA. In BOS, I was skeptical of how it would work but was excited to have frequent flyer benefits. Now that it’s years into the partnership, it SUCKS–at least for BOS flyers.
If nothing else, an appeal will probably buy some time to unravel the NEA. One month is an extremely short period to shut down (June 19th is the deadline according to Flight Global) something as complex as the NEA, especially since the defendants were given until June 9th to respond to the ruling (also per Flight Global).
Legal appeals can take years. And it’s not impossible that the NEA will be allowed to continue through the entire appeals process. It’s also possible that the appeal will only buy a few months, maybe until the end of the year.
I have to wonder why some people believe that the world’s only perfect airline apparently doesn’t believe it can successfully compete in New York and Boston without the government limiting the only two carriers east of the Hudson who have the ability to provide meaningful competition.
@Tim Dunn – I never said the Aloha/Hawaiian anti-trust exemption was directly analogous to the American/JetBlue alliance. That was never the point, and you know it. You made a very broad claim that there has never been an instance of two U.S. airlines receiving anti-trust exemption for domestic routes. You kept repeating that claim, so I showed you it was false. And it is. Now, you can go on to offer reasons to distinguish the cases, and people can discuss whether those are right (post-9/11 versus post-Covid, whether intra-state versus routes from specific cities in the Northeast) matter. But that was never the point, and you shouldn’t change your story now to pretend that it was. Your comments and challenges are there for all to see in the thread above.
Lol.. the part where Tim Dunn is directly proved wrong and is trying to cook up random stuff to salvage the situation is simply hilarious.
Gary
If you think that pulling a one year temporary, intrastate, post 9/11 case proves me wrong and has relevance to AA/B6, then I will simply let you believe that.
The simple fact – and it is obvious to everyone – that you believed from the beginning that the NEA was legally valid, you continue to believe that, and you believe it is ok to break the law in order for AA to compete with DL and UA.
Whether you can accept it or not, the NEA is dead. It was never based on sound legal footing – AA knew that in documents which became public – and most importantly, AA HAD TO PAY B6 $200 million (or forgive that much in debt) because the NEA wasn’t financially balanced.
The NEA created overlap w/ the NK merger between BOS and NYC to S. Florida which was already problematic w/ the Spirit merger. It is far easier just to ditch the NEA – which was economically not sustainable – and get the merger approved – which is far more important to B6.
B6 has other fish to fry. They very well may try to appeal but AA can’t appeal the decision on their own.
And if AA thinks it buys anything once a federal judge has ruled against the deal, then DL and UA are having a field day courting AA and B6′ FFP members and whatever corporate accounts the two might have had individually.
As hard as it is for some to accept, appeals are based on a flaw in the law, something AA has yet to say what they believe was the case.
There has been no remotely comparable ATI and JV between two domestic airlines.
And what some fail to admit is that AA had ALL of the pieces to build its own best in class presence in NYC but pissed it away over 20 years. They were the largest airline at JFK before B6 was launched. US had the same percentage of LGA slots that DL has now but Scott Kirby and Doug Parker couldn’t figure out how to use them so traded 1/4 of the LGA slots for a smaller number of DCA slots. in yet another strategic disaster, AA argued for removing slots from use post 9/11 while DL used the brief period when LGA and JFK were not slot-controlled to add flights, part of the reason why it is now the largest slot holder at both JFK and LGA – and also holds the most federal airport slots in the country.
AA simply blew its NYC strategy. Like UA’s decision to leave JFK, there is no “redo” hoping to make up for bad decisions, regardless of who made them. The only karma is that Scott Kirby is now reaping at UA the fruit of the decisions he made at AA even while repeatedly boasting about how badly AA has been run.
B6 is a low cost carrier w/o the amenities that global airlines including AA offers but AA thought it would better to partner with B6 than develop its own network; the fact that the judge noted that AA and B6 didn’t win a single corporate contract while the NEA was in place validates that the NEA did not solve AA’s problem of not being able to compete in the lucrative NE corporate travel market.
The NEA can’t fix AA’s strategic messes in the NE. It is over.
AA has a strong southern US hub route network. AA mgmt is running the company better financially than it ever has.
Who knows what a global airline without a major presence in the NE really can do but AA is now at the point where it has no choice but to move on from the NE and NYC.
It’s also worth noting that AUS and a whole lot of other areas of AA’s network could never have grown for AA to what it is if AA had to keep all of the slots active in the NE.
Some people will eventually give up and move on to something new.
The NEA is dead.
Will AA and JetBlue get their slots back that they had to give up? It would seem that if the government gets to take backsies on something it approved then reneged on after the entities involved complied with all the requirements of the deal, the entities themselves deserve restitution for the millions they spent and the assets they gave up to comply with the deal.
Dave- That would be a much more interesting discussion than the one we are all privileged to be beaten over the head with currently since a certain person can’t just agree to disagree!
:/
What is it about frequent flying that brings out the narcissists who view everyone else as non-player characters, the know-it-alls on the spectrum who can’t let anything go & the people with apparently nothing else to do but glom onto a successful blog instead of going out and enjoying real life?
One man’s “discussion and debate” is a lot of other people’s toxic poisoning of the public space. “If you didn’t want people to always and repeatedly piss in the pool, you wouldn’t allow them over” can both be true and still appalling to everyone else who hears a guest actually say that out loud at a pool party.
Typical “deflect, deflect, deflect” then “change the topic”, and “throw out random new accusations and random fake history/information” to simply do everything possible from admitting when he’s wrong.
I wish anyone was surprised
Take a walk, Tim. You stated many claims, all proved wrong. Just admit when you’re wrong
not a thing I stated was proven incorrect.
If you or Gary or anyone else wants to think that a 1 year intrastate only JV is anywhere near applicable to what AA or B6 were granted, then go for it.
Just as on the west coast to China thread, you can’t accept that AA blew it because it repeatedly can’t deliver in the marketplace what DL and UA can and do deliver.
As for the comments about thinking everyone else has to lose in order for someone to gain, that is precisely my beef about the comments from so many about AA.
But the simple fact is that AA has made MULTIPLE strategic errors in the NE and now expects the DOJ and the traveling public – as well as B6 – to bail them out.
The NEA cost AA $200 million because it flew a bunch of non-performing international routes which through the revenue sharing between AA and B6 out of balance.
There is no incentive for B6 to want to partner with anyone that can’t hold its share of the deal
AA and B6 didn’t win over a single new joint corporate client as a result of the NEA. All the NEA accomplished is that AA pushed a bunch of leisure passengers onto its longhaul transatlantic flights.
The NEA is dead because it has no legal basis to have ever been created – something many of us noted years ago – and because it didn’t work financially even when it was in place.
The fact that Tim Dunn states “Who knows what a global airline without a major presence in the NE really can do” shows clearly how he twists facts because in the NE, AA is obviously the largest player with hubs in PHL, JFK, LGA and a strong operation at BOS. It is just NYC area where AA is weak relative to UA and DL and his complete deflection from that fact and trying to twist facts to give the impression that AA is weak overall in the NE is quite telling of his all-prevalent bias. In fact, it is DL that is weakest in the NE with just presence in NYC and a much smaller presence BOS. And literally an afterthought at DC and PHL. In fact, DL’s presence is the NE is essentially running empty planes through LGA to simply squat on slots there.
@Tim Dunn – if you can’t be honest and admit that you were wrong when claiming that *no U.S. airline* had ever been granted anti-trust immunity for domestic operations after I showed you the DOT order granting such immunity to Hawaiian and Aloha, I don’t even know what to say.
It’s fine to argue that the case isn’t relevant to the American-JetBlue anti-trust case, though I never said it was, only that your bold claim that such a thing had never happened was wrong.
The respectable thing would be to acknowledge you made an overclaim not supported entirely by the facts and move on, not gaslight.
Gary,
If you or anyone else would like to claim victory in noting that my statement about two US carriers having JV is incorrect because AQ and HA had a 1 year temporary intrastate only JV, then I will gladly admit I was wrong.
It obviously has absolutely no relevance to AA-B6 nor will AA claiming it does will matter in court.
The issue is that you have believed there was legal basis for the NEA, something which some of us said was not the case from the beginning. Even though the DOJ and a federal judge ruled against the NEA, you and others want to believe the NEA was legally defensible. It isn’t.
Does it take 3 strikes to realize you really are out?
Moving on to the post above yours:
First, let’s get a few geographic definitions and rankings correct.
If size in the airline industry is measured in anything other than revenue, it is ASMs and on that basis:
– If the NE is defined as all states (and DC) that border or are the easternmost points in the US, then UA Is the largest carrier in the NE, DL is 2nd and AA is 3rd – and it all has to do with the amount of longhaul international flying. AA has very little longhaul international flying in the NE compared to DL and UA. UA has two large longhaul international hubs – EWR and IAD while BOS for DL is well on its way to overtaking AA at PHL as a larger longhaul hub.
– If the SE is defined as including any hub on the east coast that borders the Atlantic, then AA is the largest carrier with DL second.
– If the eastern US is defined as all airports or states (partial included) east of the Mississippi River, then DL is the largest carrier because it then includes its DTW and MSP hubs.
– IF east of the Rockies is the definition, AA is the largest because DFW is included.
If the definition is local market revenue, DL is the largest carrier in every one of the categories except for the NE.
AA operates a large connecting operation in the NE, does not even have the most flights at slot controlled airports and does not generate the most local market revenue.
DL is the second largest slot holder at DCA – hardly an afterthought. And if the DCA exemption proposal passes – which it very well may because it is linked to FAA funding – then DL will have a pretty competitive presence at DCA both on the east coast and to the western US.
Second, the assertion that DL is squatting on slots is patently contrary to DOT data. DCA has had lower LFs than LGA and AA has specifically turned DCA into a banked hub in order to increase the LFs = but that has resulted in ramp congestion that spills out into taxiways, affecting every other airline.
And the NEA was created solely because AA was told by the DOT to either use its LGA and JFK slots or lose them. AA specifically said in testimony and documents before the court that the reason it rejected an AS style agreement with B6 was because such an arrangement would not have allowed.
DL is the only one of the big 3 to have fully complied with all federal slot regulations – or wasn’t chastised by the DOT or FAA for misuse – while slot controls at EWR were dropped because of underutilization of slots while the entire NEA was an attempt by AA to not lose its slots – something that looks more and more likely to happen.
AA could have leased slots to B6 and still might but the number of slots they want to lease (if at all related to how many AA and B6 have swapped so far) will trigger a DOJ review anyway – which will undoubtedly result in some of the slots going to even smaller carriers, including ULCCs.
So, let’s not talk about DL’s use of slots when the track record for AA and UA on slot usage is as bad as it is.
The simple reality is that the NEA is legally dead and didn’t work economically. That was proven in court. AA’s size at JFK was directly tied to hoping that B6 would subsidize AA’s losses on new longhaul international routes – and AA got the math wrong on how much B6 would be willing to absorb and AA paid good money trying to feed its international flights which still are certain to have lost money.
The NEA is dead for a host of reasons.
Any rational person will recognize that AA is hoping that B6 will join them because AA doesn’t have a better plan but B6 does. AA has every reason to keep trying even if no one joins or believes them.
Lol. Tim Dunn is yet again choosing to nitpick definitions that will not show DL to be the smallest on the NE and suit his narrative… Hilarious. But exactly as expected…
the only thing hilarious and sad is that some people don’t know real facts so they create their own and then mock someone else when they are shown to be wrong.
AA is not the strongest player in the NE – which is why they thought they could get by w/ creating a virtual merger with B6 in that region – but the DOJ said “not so fast” and a judge agreed.
UA has an enormous amount of longhaul widebody capacity from the NE.
DL is developing BOS into a very serious international hub while UA is committed to growing IAD because both see each other as the competition.
Because it chased a strategy which no one in authority in the US government will allow, AA will be left further behind DL and UA not just in the NE but in the total international market.
MEH NEA
Tim, Just thank you for the laughs. I hope you have a fun weekend ahead. AA does a lot of things wrong, but your irrational nonsense about them is just amusing…
Do you even hear yourself?
“Because it chased a strategy which no one in authority in the US government will allow, AA will be left further behind DL and UA not just in the NE but in the total international market.”
If you even read what Gary writes, part of his argument about all of this is that that the US government did allow AA and B6 to form the NEA. A separate political administration changed the rules after the fact which, whether you like the NEA or not, isn’t a good business environment for sustainable investment.
You really don’t even think about what you write…
Maybe the NEA will win on appeal, maybe not. But your dogmatic statements “it will never…” off little antitrust knowledge is just laughable. The US government already did allow it. lol. A separate administration didn’t like it.
Max
this is Thursday. My weekend is still more than a day away.
And it will be good regardless of what happens here.
As has been explained to you and others, the DOT used its antitrust authority while the DOJ claims the DOT exceeded that authority, the DOJ sued and a judge backed the DOJ.
The DOT got its hand slapped.
It is absolutely correct to note that no one in authority in the US government has given AA/B6 the appropriate ok to keep the NEA.
AA and B6′ own statements showed they knew the NEA was legally questionable even before the DOJ sued- and yet there are still people that cling to the notion that AA will magically appeal what 2 sets of government has denied and it will all work this time. That is the only thing that is … hilariously sad to believe anyone would think such a thing will happen.
And, if you knew anything about federal courts, there’s a reason why DOJ or businesses file cases in specific jurisdictions: they research which judges (in that area) are more likely to be receptive to their arguments which is exactly what happened here.
Who knows… maybe an appeal won’t work. I do think the antitrust lawyers that AA and B6 hired have a better understanding of antitrust law vs Tim Dunn (or me, but I don’t claim to be smarter than them) but we’ll see whether a higher level federal judge disagrees with the decision since it would create lasting and unique precedent for future mergers or other agreements to share revenue.
Maybe JetBlue doesn’t want the hassle of an appeal, but an appeal to higher level courts usually reflects a fuller understanding of federal law vs a cherry-picked federal jurisdiction by DOJ.
btw, unless you think that Biden will lose in 2024, the administration you have now is the one that will decide the future of the NEA.
Are you making a prediction that Biden will lose or that AA/B6 will wait 5 years to succeed at an appeal?
unless you are making a prediction that the current occupant of the WH will lose next year or that AA/B6 will wait 5 years to win an appeal, the administration you have now is the one that will settle the future of the NEA.
Tim,
Be serious and make a serious argument. The DOT approved something under the past administration. It surprises no one that they did their due diligence at the cabinet level or at lower levels to find out whether DOJ would sue over it. Use facts, not your perceived desired reality.
The only difference is a different political party and administration in place. Stop making irrational arguments. The US Government of a different political party did approve it, just like a Republican administration approved a far larger actual merger between your beloved DL & NW. And a Democratic one approved UA/CO & AA/US.
And please… you don’t work. Your weekend already started. You wrote a five paragraph reply to me 6 minutes after my post. No one with a job does that. We all already know you don’t work for Delta 😉
And yeah. I’m off today.
“the administration you have now is the one that will settle the future of the NEA.”
Again… you don’t even know how this process works… the administration won’t settle anything. The ultimate authority in a court case is the Judiciary, the executive branch can sue to their hearts content.
The current administration party did not appoint the majority of the head of the judiciary, in case you’ve been living under a rock. It would a bit unique for the Supreme court to get involved in this, but this is also creating unique legal precedent so who knows… but I do know, given this is a court case, your assertion that the current administration will decide the NEA court case is nonsense.
Max,
whichever administration granted the original NEA approval isn’t the issue. The issue is that the DOT doesn’t have authority in a domestic antitrust case; only the DOJ does which is validated by the excerpt that Gary shared about the AQ/HA short-lived intrastate JV.
Unless you can find a JV that was granted by the DOT and has survived legal challenge, we’re going with that the DOJ – which sued and won against AA and B6 – has jurisdiction.
“the government” doesn’t mean anything….
It is that the NEA violates US antitrust laws – and AA knew it – but did it anyway because they didn’t want to lose their slots and an AA/AS type relationship would not have allowed them to preserve their underutilized slots.
AA knew what it was doing.
The DOJ did its job – just as it has for years.
We have wasted enough bandwidth on this topic.
Until either B6 gives indication of its intentions or AA succeeds at something, let’s give it a rest and let you consult with your brethren at Centerpork as they figure out how to avoid being relegated to #4 instead of just #3 in NYC.
as always, I enjoy a pleasant chat w/ anyone – including you!
Again, the previous administration, that includes DOT & DOJ approved the NEA. Full Stop. The idea that DOT was just out there doing their own thing not interacting with DOJ on this topic is ludicrous.
Of course, given the timing, the DOJ of a separate administration can still sue, but that doesn’t change the FACT that the US government did approve the NEA even though this seems weirdly difficult for you to accept.
And… DOJ has the power to sue over existing antitrust law, not approve things like the NEA. DOT has the power to approve an arrangement and, as I’ve said, it stands to reason that they consulted with the DOJ under the previous administration, exactly what others have been trying to say. The Obama administration didn’t come in after Bush and sue over DL/NW. Why should they have done that here when the merger of DL/NW was the catalyst for much of the monopolistic airline industry we see today, far more than the NEA that is actually creating a competitor for what the DL/NW merger created in NYC, in particular (in addition to forced slot divestiture by DOJ of US/AA that only made DL more powerful in NYC)? The point is that, in comparison, the NEA is nearly nothing compared to what DOJ has decided to settle or leave alone within the past 15 years.
This NEA had been sitting in the halls of Washington for nearly a year. The idea that DOT under the Trump administration had no idea what the DOJ under the direction of the Trump administration thought is just silly and you know that. These types of major decisions aren’t made in isolation. They’re made as a Cabinet with cabinet secretaries conferring amongst one another. I will grant you this though… at the time of the DOT approving, the DOJ was in absolute turmoil, to say the least given the resignations going on at the end of the Trump administration…
And per “AA knowing it violated antitrust”… it is not AA’s job to figure out whether something violates antitrust law, it’s their job to contemplate whether it could. Of course you’ll find emails at AA contemplating the issue. That surprises you? It would be worrisome if they hadn’t contemplated it. But it was their job to figure out the best option for the shareholders of AA (and same for B6 executive team) and try for it. Which they did, and got APPROVED BY THE US GOVERNMENT, after months of it sitting in the halls of DOT and conferring with DOJ.
Good Lord!
Dan,
it is frightening how much some people are committed to fighting for a deal which TWO BRANCHES of the federal government has said is illegal.
If MAX was so certain that the DOJ under Trump approved the antitrust provisions of the NEA, then he should be able to provide documented proof.
I say that knowing that I asked Gary to come up w/ proof that I was wrong about the DOJ approving ATI for 2 domestic airlines and he found the AQ/HA case even though the first page of the DOJ’s order which he linked says
” Section 1 16 of the Aviation and Transportation Security Act of 2001 (Public Law 71, November 19,2001) provides that the Department may approve and grant antitrust immunity to agreements between air carriers operating air services withn a single state, if the Governor of the state has issued a declaration that the agreement is necessary to ensure the continuing availability of such air transportation. The Department may grant the antitrust immunity upon a determination that (i) the state involved has extraordinary air transportation needs or concerns, and (ii) approval is in the public interest. Under the statute, the Department may grant antitrust immunity through October 1,2002, but may extend that approval through October 1, 2003, upon a determination that such action is in the public interest. ”
on pages 3 and 4, the DOJ says
“DOJ opposes approval of the requested immunity and urges the Department to deny the carriers’ application. DOJ raises three major arguments. First, DOJ argues that we may not grant an application under Section 1 16 for approval and antitrust immunity for an agreement unless the agreement is necessary to preserve the State’s air service. DOJ contends that the statute does not authorize us to approve and immunize an agreement on the ground that it is necessary to maintain the services of both parties to the agreement.
Second, DOJ argues that the carriers have not met the statutory requirement that approval and antitrust immunity for their agreement are necessary to ensure the continued availability of service in the state.. DOJ contends that both carriers have already unilaterally cut capacity in greater proportion than the decline in traffic with resulting increaes in load factors, and that their inter-island yields and overall financial conditions are improving, discrediting the carriers’ contention that, absent this agreement, they ultimately may have to discontinue their inter-island service alt~gether.~ Third, DOJ argues that the proposed capacity/revenue balancing agreement between the caniers is not in the public interest, as it will result in serious harm to consumers through higher fares and poorer service in some of the most heavily traveled city pairs in the United States. In this regard, DOJ contends that the agreement between the carriers is highly anticompetitive, as the revenue balancing provision will discourage price and service competition, and produces a “powerful disincentive for the carriers to reduce fares or improve service in order to attract additional passengers,” because doing so will most likely trigger the penalty payment provisions. Consequently, DOJ argues that the agreement actually encourages the carriers to increase fares and discourage traffic in order to avoid the penalty payment provisions, both of which they maintain would be contrary to the public interest. DOJ further contends that the Department cannot rely on the Governor’s declaration to support a finding that the agreement is in the public interest, because the Governor relied solely on the representations of the carriers. ”
The DOJ wasn’t in favor of ATI even in the very limited HA/AQ case but did it because the governor asked and it only involved intrastate transportation.
And ultimately the state of Hawaii couldn’t save Aloha and may now soon be fighting to save Hawaiian – but will not succeed against much stronger mainland carriers.
The point is that there is no legal basis for approving ATI between 2 US carriers operating as AA and B6 are – and the DOJ’s own findings which Gary linked show that. Many of the arguments that the DOJ cited 20 years ago look very much like what the DOJ cited in the AA/B6 case.
TO somehow think that some believe that the DOJ or any branch of government changes its approval of major policies just because there is a change of administration is really scary.
And the bigger point is that the NEA is dead and AA knows that the NEA was the Hail Mary that AA had to try to keep its slot portfolio.
Given that AA execs just said that the impact of terminating the NEA is immaterial, AA can FINANCIALLY move on. $200 million for a $50 billion/year company IS immaterial. AA said they get $2.5 billion in revenue from non-hub markets covered by the NEA – so they know exactly what is at stake if they turn BOS and NYC into large spoke operations, dehubbing both cities.
Strategically moving on is a big difference – and a whole lot of people here cannot accept that Hail Mary’s often don’t work in football either.
AA has a very strong southern US route network which is doing very well right now, it is fixing its balance sheet, and it is slowing its capex.
It hasn’t participated in much of the corporate travel market in the NE for years and the NEA didn’t help.
The real questions which people should be asking are:
– who will pick up 150-200 slot pairs worth of flights at JFK and LGA if AA walks away from them?
– if B6 tries to lease them, how many will be divested to other carriers and what will be the impact on the NK merger?
– will alot of those slots just not be used by anyone and NYC airport operations will suddenly get better?
– since Gary is convinced that DL will get stronger, how much stronger will they get?
– what will AA and B6 do w the planes that were committed to markets under the NEA that neither want to fly w/o a subsidy and JV?
These are the questions that people should be asking…not arguing about how the DOJ and a federal judge got it wrong…
All I said was Good Lord! Will that precipitate another novel?
@Dan77W
Facsimiles are still sent whether you like it or not. Ask Aloha Airlines. Jim provides a level of insight that is seen no where else in the darkest corners of the industry.
Some say it’s in his DNA. But that’s putting in lightly. It goes beyond that, it’s not just DNA. It’s NEA.
Aviation is a marathon, not a tweet. There are no character limits.
Dan,
half of what I posted was a copy and paste.
the other half is simply to note that people continue to shake their fists at the sun thinking they will change things when in reality, AA knew the NEA was doomed from the beginning and it was nothing more than a Hail Mary effort to keep from losing slots. They lost money trying to keep their NYC operation alive – not any different than they have been doing for 20 years.
Rather than arguing about how the government got it wrong, people should be talking about where the slots that AA was trying to protect will go. and what AA and B6 will both do with their respective NE networks and where they will redeploy those assets.
Let’s see first of all what B6 says about an appeal – they have a couple more weeks before they have to present their exit plan for the NEA to the judge – but I suspect they will turn their focus to getting the merger approved and should no longer be willing to give up NK’s NE assets and instead focus on the real overlap – which is FLL – but which is fixable.
whether AA’s longhaul international strategy is “fixable” is up for considerable debate.