Last summer American Airlines and JetBlue announced a partnership in the Northeast covering New York and Boston.
After striking a deal like this, there’s a period of time for the Department of Transportation to review the deal. They allowed that time to lapse but still struck a deal with JetBlue and American to give up some slots in New York and at Washington National in exchange for DOT approval.
Competitors don’t like this for obvious reasons,
- American and JetBlue are the number smaller players in New York than Delta and United, this makes them competitive.
- Other airlines would like to have the government take more of their takeoff and landing slots, and give those slots to them.
American Airlines New York JFK Terminal 8
Make no mistake this deal is good for customers. It makes New York a more competitive market, and lets scarce slots get used more effectively to match the routes passengers want. American will no longer need to squat on JFK slots.
However there’s a new administration, which has been predicted to press harder on anti-trust than the previous one. And JetBlue’s pilots are adamantly against the deal (which is odd, because it means more slots and flights for JetBlue to operate, the losers here are American Eagle pilots). The current administration is more responsive to labor concerns.
So, pandemic which has created unprecedented challenges for the airline industry aside, it shouldn’t be entirely surprising that the Department of Justice has ‘stepped up’ a probe of the partnership which has already been approved by the Department of Transportation “and is concerned the deal could lead to inflated fares at key traffic hubs.”
If you look at what the deal actually requires, though:
- American and JetBlue have to increase seat capacity in New York, or else they lose 10 more New York JFK slot pairs. We’re pretty much guaranteed more supply of seats (and thus downward fare pressure).
- JetBlue has already agreed not to exit JFK non-stop (non-seasonal) routes it served as of February 2020, except for Long Beach, Oakland, and Worcester, Massachusetts. They’ll remain a competitor on routes they already operate.
- And the two airlines aren’t allowed to discuss “future fares, fare levels, or revenue management strategies” and they separately can’t discuss route, scheduling or capacity outside the scope of the New York/Boston agreement.
Artist’s Rendition Of New York, Inside American Airlines New York JFK Terminal
This deal creates competition, because on their own JetBlue and American aren’t competitive with United and Delta in New York and certainly American isn’t. The fact that competitors are mostly the ones complaining underscores this. The Department of Justice may think they’re representing consumers, but they’re really hearing from American’s and JetBlue’s competitors. The government’s review was already done here, everyone moved forward. It’s time to let customers benefit.