A federal court sided with the Biden Administration’s Department of Justice, ruling that the American Airlines-JetBlue partnership should be broken up on anti-trust grounds. It’s an odd conclusion, but the ruling itself is fascinating reading. It contains great details about how the deal evolved between the two airlines.
There’s little question that consumers benefit from the American Airlines-JetBlue partnership. Both airlines are smaller than Delta and United in the New York market. And, because JFK and LaGuardia airports are slot-controlled, neither one could grow. American has lost money in New York for years, despite trying a number of different strategies to make up for their smaller size. This deal:
- Increased the number of strong competitors in the market from 2 to 3 which is good for consumers
- Required American and JetBlue to increase the number of seats flown in the market, which they couldn’t legally do by adding flights so they had to fly bigger planes. That’s good for consumers on its own.
- And the requirement to offer more seats (increase supply) means a downward pressure on prices.
- So far from giving American and JetBlue some kind of monopoly, breaking up the deal protects the effective United-Delta duopoly in New York. This ruling undermines competition, rather than protecting it.
The judge’s discussion of the backstory that came out during the trial supports this position, but I want to highlight it merely because it’s interesting for outside observers to see how the alliance came to pass.
- American Airlines had been underutilizing its slots in New York. By 2019 they were afraid that they would have those slots taken away (I wrote about their underutilization and slot squatting extensively in early 2019).
- So they first worked out a deal to lease slots to JetBlue. They initially negotiated American sending 27 slot pairs to JetBlue, but then they began talking about more.
- American’s new partnership with Alaska became the model as talks progressed. American had no viable option to grow and was losing money in New York, so it was either walk away from New York (slot leases) or partner up with JetBlue. Meanwhile JetBlue couldn’t grow either and doing a deal of some kind with American was its only path.
Here’s what they did next:
Negotiations between American and JetBlue continued despite the COVID-19 pandemic.
In April 2020, on the advice of their legal departments, American and JetBlue each designated representatives to a “Clean Team”—a group of individuals with knowledge of scheduling and network planning, but whose daily responsibilities did not involve such work.
The Clean Team built a theoretical joint network schedule that would allow American and JetBlue to evaluate what the carriers could achieve via a partnership. This process lasted through May 2020. Ultimately, the Clean Team produced a hypothetical schedule for 2023, which pooled the resources of both carriers —including aircraft they did not yet possess but, per their respective order books, they expected to receive by 2023 — and “optimized” them to create one cohesive NEA schedule.
The Clean Team then ran the schedule through a proprietary tool American uses to estimate passenger traffic and revenue.
The agreement that was ultimately announced in July 2020 was for successive, auto-renewing 5 year terms though could be terminated with a two year period at the end of a term or in certain other circumstances with payment of breakup fees.
The two airlines then began swapping slots at New York JFK and LaGuardia airports.
Later in 2021, American and JetBlue executed a pair of slot lease agreements. American leased to JetBlue ten slots at JFK and thirty-seven at LaGuardia for approximately one year, ending October 29, 2022. PX 0001-h. JetBlue leased to American eight slots at JFK for essentially the same term. PX 0001-i. In March 2022, American leased to JetBlue thirty-two more slots at LaGuardia and twenty more at JFK for terms beginning on different dates in 2022 and ending in March or October of 2023.
The NEA was considered 80% complete by fall 2022. The court acknowledges growth in New York as a result of the NEA, but – because of delays in aircraft deliveries (and, I’d note, a pilot shortage at regionals) – that growth has come at the expense of flying elsewhere. The court also acknowledges that “American’s slots at JFK and LaGuardia have been used more heavily and efficiently” as a result of the NEA. Both are good for customers in the covered areas.
The court dismisses benefits of the alliance by noting that some routes have seen a reduction in capacity, even if capacity has increased overall. Even Delta has to agree that this is shoddy reasoning, because they’re currently petitioning the DOT to allow them to move their Portland – Haneda flight somewhere else where it will better serve passengers.
Here’s how revenue gets split between the two airlines within the Northeast Alliance:
The NEA’s revenue-sharing mechanism is established by the Mutual Growth Incentive Agreement (“MGIA”), which was executed concurrently with the NEA Agreement. Modeled after the profit- or revenue-sharing features of American’s other joint ventures and alliances, the MGIA’s purpose is to align the partners’ incentives and achieve something the parties call “metal neutrality.” Metal neutrality means American and JetBlue are indifferent to whether a passenger flies a particular NEA route on an American plane or a JetBlue plane. Metal neutrality within the NEA region—that is, on flights to or from the four NEA airports—is a cornerstone of the NEA. The sharing of revenues generated by both partners in the alliance renders each agnostic about which partner’s aircraft a customer chooses, and also furthers both partners’ shared objective of attracting passengers away from other competitors (here, Delta and United).
The MGIA establishes a complex process for splitting the revenue pool annually. The pool itself, or Net Revenue, is composed of defined categories of passenger-related revenue, less certain selling expenses.28 Doc. No. 324 ¶ 189. The Net Revenue is then divided between the partners in two stages. First, each carrier recovers a Base Revenue, calculated by multiplying a defined measure of that carrier’s performance during 2019 by “an agreed upon measure of seats and distance flown by [that] carrier during the most recent year.”29 Id. ¶ 191. After subtracting each carrier’s Base Revenue from the Net Revenue, the remaining Incremental Revenue is divided based on each partner’s proportion of the total NEA capacity for the relevant year. Id. ¶ 195.
Because there is no literal “pool” of money awaiting division according to these formulas—each carrier having collected revenues from sales made to its respective customers throughout the year—the revenue-sharing process is settled via an annual “transfer payment” due from the partner that collected more than its designated share to the partner that came up short.
The defendants urge that the MGIA is designed to incentivize growth by both of them, and to spur continued competition between them. E.g., id. ¶¶ 196-97. Certain features do appear to reward growth. For example, by calculating the Base Revenues using a factor tied to each partner’s present-year flying, rather than sharing in a fixed proportion based entirely on performance in the base year, the MGIA makes it possible for a carrier to increase its share by adding capacity (in the form of seats or miles). And, of course, splitting Incremental Revenue based on capacity might reward one partner for growing more than the other.
The judge though dismisses the manner in which growth is encouraged, arguing that the two airlines won’t be destructive towards each other, and therefore the agreement doesn’t protect ‘competition’. The judge also rejects growth because the two carriers are resource constrained (but doesn’t seem to realize those same constraints exist even without the partnership).
The decision notes that American’s long haul flights didn’t perform as well as hoped in 2021 and the revenue-sharing formula wasn’t applied strictly:
At the end of 2021, the parties applied the MGIA’s revenue-sharing process for the first time, determining how revenues generated by the NEA that year should be divided between them. Under the terms of the MGIA—terms which the parties designed, and which numerous witnesses described as necessary to appropriately align their incentives—JetBlue owed American a transfer payment upwards of $200 million. The hefty sum resulted from American “adding a great deal of long-haul capacity into JFK that didn’t perform as well as . . . expected.” Trial Tr. vol. 5 at 219-20. Nevertheless, American forgave the lion’s share of the amount due, agreeing to accept from JetBlue only a fraction of the total due and cap the transfer payment at $27 million.
American, which has recently let go a substantial portion of its sales team, had not made any joint bids with JetBlue for corporate customers. Although, in fairness, corporate business travel in the New York market is down substantially (as is in-office occupancy). And existing corporate deals for both JetBlue and American extended those deals to the other carrier within the Northeast Alliance in order to grow business.
The judge’s decision notes that frequent flyers (which include corporate customers) gain the most from loyalty program reciprocity – but dismisses this because such consumers are reportedly around 15% of passengers making up less than half of revenue (this conflates elites with people flying two or more times a year).
Where the decision makes its strongest argument is in noting that American and JetBlue could have partnered less extensively, along the lines of American and Alaska on the West Coast. I don’t ultimately find it persuasive that the consumer benefits would have been as great, and the nature of slots in the New York market make them fundamentally different, but the airlines could have worked together less while achieving some benefit.
In reaching a decision, there’s very little discussion of passengers or consumers, or how they are actually harmed, as opposed to a take that reducing the number of airlines in the market is per se illegal.
- The decision more or less says American and JetBlue no longer compete in these markets, so there’s less competition, Q.E.D.
- And it goes on to argue that regulators now consider JetBlue no longer independent or a maverick, and so no longer benefits from regulatory largesse in matters like slot allocations. Since regulators think the NEA is anti-competitive, that makes it so. And the major focus here is on London slots, though the market is entirely outside of this agreement.
- Finally it talks about exiting markets and allocating which airline flies where as illegal, not whether it… benefits or harms consumers.
The decision made for a very interesting read. It’s one judge’s take on the situation, which remains… developing. For over 40 years, anti-trust jurisprudence has focused on a consumer welfare standard, and it seems likely that the extent to which this decision hews to that standard will be a fertile ground for litigation.
There are other ways in which the judge may have erred, such as in handling of expert testimony and reasoning for being so dismissive of the defense in this regard, but that’s outside my area and would be interested in hearing opinions from specialists who have read that section of the decision.
(HT: @RossFeinstein)
I am glad that you actually have now read the documentation from the judge which you have included in this article, even if you throw in random and incoherent conclusions that aren’t part of the case and are only connected in your head.
The NEA has nothing to do with the HND route case which involves the restraint of trade inside of what is supposedly an Open Skies agreement. Those types of agreements are intended to allow companies to vigorously compete by maximizing their assets.
The NEA as AA and B6 execs both testified was intended to reduce competition which is why the deal was struck down.
AA and B6 fumbled their way through their partnership and never achieved a reciprocal benefit so there is little harm in separating the two. As many including me have stated, AA is harmed by not having access to as large of a NE network as they would have had if they flew their own slots but the partnership still financially benefited B6 more – which means pulling it apart will hurt B6 more.
As I have stated elsewhere, AA has mismanaged its slot portfolio in NYC for decades and the judge also said it was relevant that US gave up 1/4 of LGA’s slots = and the relevance is that the same management that concocted the NEA was the team that traded the LGA slots to DL and orchestrated the merger between AA and US. They knew exactly what they had done and the judge connected all of AA and US’ handling of its slots as the same. The judge also noted that AA knew they could have come up w/ an arrangement like AS but that would not protect the slots.
The question now is how AA covers for all of the slots that it has to use or lease. If it simply leases those slots to B6, it could trigger another DOJ review since the DOJ has repeatedly intervened in slot transactions – and they do not see B6 as an innocent party, meaning the chances of a full transfer of slots is slim to none.
The benefits of the partnership were largely for consumers and not negotiated business traffic which also says that AA very likely was not going to see financial benefits enough to turn its NYC operation around.
Given that their system finances are doing well, the most likely outcome is that they simply walk away from a chunk of the NYC market – but they haven’t participated in it from a corporate standpoint for a number of years. Consumers buy what is offered.
B6 and NK has a better chance of moving forward not because the DOJ has to concede something to B6 because they rejected the NEA but because there is a far stronger legal case and established remedies to fix the merger concerns while there is not for the NEA.
If AA doesn’t “walk away”, maybe it will finally decide to offer a competitive lounge for domestic customers at T8 at JFK. In about a month, Delta will offer two world class lounges at JFK for its domestic passengers at T4.
What are the next steps here? I would think they AA/B6 would want to appeal, is that possible? Can they stay the order in the meantime? The addition of repricocity on JetBlue for my EXP status has been a great addition for routes I find AA doesn’t serve. Would stink to just end that overnight.
“Slots’ are the problem. The fact that we allow legacy carriers to own slots and control them so long as they use them is so outdated, anti-competitive. If slots are the best and only solution, that leads to monopolistic pressures like they have now. The better solution would be to have a periodic lottery system with set prices that are low enough so that new carriers could come in and compete. Slots would be set up for city pairs, or regions and set to a minimum number of seats. To assure that there are plenty of seats, slots would be allocated to a set minimum number of seats each year, some high, some low. Seats minimums would be based on previous years as well as projections. While we want large planes during high demand, we also want some commuter traffic. There, solved it! Why do they have to make things so difficult?
@Tim Dunn – “I am glad that you actually have now read the documentation from the judge” I wrote this yesterday.
“The NEA has nothing to do with the HND route case” you’re missing the point, Delta made an argument in that case about airlines choosing routes based on consumer demand and *that argument* applies here, or rather it would be hypocritical for Delta to take inconsistent positions across these two issues (not that that’s stopped them before in anything involving government subsidies and what benefits Delta).
There is no question that this alliance was created to boost the pricing power for both AA and JetBlue, which is horrible for cosumers.
The DOJ sited in their findings a dozen routes where the price increased after the creation of the NEA (link below slides 22 & 23). Did you honestly believe AA and JetBlue created this alliance to lower prices for consumers???
https://www.justice.gov/atr/case-document/file/1552921/download
Tim “Your Criticism of Delta by Way of Analogy is Irrelevant” Dunn
Metal neutrality for the airlines where it’s ‘totally agnostic’ for them didn’t apply to customers.
The lack of key loyalty benefits for fliers on either airline eliminated any actual customer metal neutrality.
This was a self serving deal – they should have made the arrangement like NW/CO where there was true metal neutrality for **fliers***.
Gary,
demand or capacity between PDX and/or HNL to HND on DL actually backfires.
DL schedules the A330-200 to PDX and the 767-300ER to HNL.
Every other DL route across the Pacific (except Hawaii) uses A330-900s or A350-900s.
If demand or capacity have anything to do with these routes, then your argument fails unless DL uses one of those first 2 aircraft types on whatever route it asks to move the route to.
You are trying desperately to connect two cases – both of which will benefit DL at the cost of someone else – because you can’t accept the judicial decision in the NEA case.
And, since you clearly missed or ignored it, DL is not asking for exclusive ability to transfer its own HND slots.
DL is asking for the same ability for every other US carrier.
UA just happens to want the status quo much more so than any other US airline service Japan. AA and HA BOTH support DL’s request.
Luke,
too bad you can’t debate the issues which at least Gary does.
Greg,
most significantly NW/CO did not have a joint venture and didn’t jointly plan capacity or share revenue. THOSE are the reasons that the DOJ got a judge to agree that the NEA needs to be jot down
The judge’s logic is flawed at best. The NEA was meant to compete with Delta. That aspect of the arrangement seems to have been deliberately ignored by the DOJ and the judge. But that’s politics.
I’m guessing (and only guessing) that American and JetBlue will appeal the ruling – id only to buy more time to unwind the NEA. Both the DOJ and the judge told JetBlue and American what they felt would “fly” (pun intended) so I fully expect them to make those changes. It won’t surprise me to see a slot swap/leasing arrangement between American and JetBlue as part of the new arrangement. American still has Philadelphia, which is a complete domestic/international hub, not split as the JFK/LGA and IAD/DCA duos are. LGA and JFK don’t need to be connecting hubs. There’s plenty of O&D in New York.
I really think it’s sad (“sick” is probably a better word to describe how I feel, but I want to try to be nice) when some people hint that they want to see certain companies liquidated. Some of the nasty comments I see here and in other spaces give me that impression.
you guess and you failed, Ghost
The judge noted that the NEA was created by a desire to join AA and B6’s joint rivalry with Delta.
He said, though, that whatever common intent AA and B6 might have does not justify violating the law.
In the aftermath of AA and B6′ failed attempts, they are now weaker as they try to compete with DL than they were before.
The court specifically notes market shares of each of the airlines and that DL was the fastest growing airline during the time the NEA was in effect.
DL wasn’t on trial but gained the most because it played by the rules of competition. Quite a concept.
@ Anthony says: If AA doesn’t “walk away”, maybe it will finally decide to offer a competitive lounge for domestic customers at T8 at JFK.
AA does have lounges at T8 Greenwich Lounge – guess you just don’t have high enough access…..
It’s odd, as a UA-centric flyer in NYC, all of this JFK/LGA related drama feels so close and yet so personally irrelevant. (Yes, I know UA is also at LGA, but usually my destinations are out of EWR, and EWR is no harder to get to than LGA from where I live, if somewhat more expensive.)
@john don’t forget “refusal to acknowledge even one thing, however small, done well by a domestic airline other than DL or Southwest”
john,
and yet what you can’t deny is that Delta has generated more profits during the past decade than any airline – perhaps in history, is worth more to investors, and has an unmatched revenue generation advantage in part because of a number of the things that you mock on your list.
Maybe instead of mocking the messenger, you should be asking why other airlines didn’t figure out how to gain those advantages and help them figure out how to do it now.
And specific to this discussion, it is undeniable that Delta is the major winner in all of this NEA nonsense. AA and B6 bet on a strategy that AA’s own execs knew was legally problematic but they did it anyway.
Now AA and B6 have to extricate themselves from the mess they created, and the chances are high that DL will become even stronger in the process.
And that is before the proposal to increase DCA beyond perimeter flights as well as the HND gateway flexibility request – both of which are more likely than not to be approved.
And I might add, this is all before the expected Delta-Airbus purchase that is supposed to be announced at the Paris Air Show that will further accelerate Delta’s distinction as the lowest cost and most efficient producer among all US and many of the largest global airlines.
@Tim Dunn,
Who gives a rip? How does Delta’s profitability make things better for me, personally? I’m on the consumer end of the spectrum, rather than the owner or investor end, and airlines are not like football teams where I boast about what winners or losers they are. They’re just companies providing a product. It’s entirely possible for a company to be more profitable, and more strategic, while providing a product I like less. I like Delta’s product less than United’s, for various reasons both logical and preferental. So what if United is less profitable than Delta? I certainly don’t care. And I don’t really understand why you do.
I think the reason you are not taken more seriously as a messenger, despite being well informed and often persuasive, is because despite your apparent belief in your economics-grounded objectivity, to the rest of us, you come off as anything but objective, but rather than an ultrafan. You only ever have positive things to say about Delta, and to a lesser extent Southwest, and you never have a single positive thing to say about any other US airline.
That discredits any arguments you make, because of course, like any company, Delta has flaws, and even poorly run companies do some things right. Your black and white view of airlines, speaking about them in absolute terms of winners and losers, makes you difficult to take seriously as an information source, even when you’re correct. Your lack of perspective makes you an unreliable messenger, unfortunately. At least for me.
Ivan X,
first, you are seriously deluded if I am not taken seriously. I have plenty of people that follow my writings and echo it around the internet.
Second, I know full well that I do not take the pro-consumer or aviation fan boy stance that comprises most aviation chat and blog site participants. That is precisely why I participate
and third, it is because all US and most global airlines are for-profit, privately (vs. state-owned) held companies whose first reason for existence is to provide a return for investors. If you don’t the basics of how the free enterprise system works, then it is not surprising that you discount what I say.
Understanding that airlines have to make a profit or they end up like Eastern, Pan Am or others profits the basis for seeing the future of the industry – one strategy at a time.
The simple reality is that AA and B6 pursued a strategy with the NEA which many of us said would not succeed and that is exactly what has happened.
The judge recognized = like a whole lot of participants on aviation chat forums – that Delta stands to gain the most if the NEA failed. It isn’t a stretch to now say that AA/B6’s failure will further benefit Delta, which is not only in one of the strongest positions it has been in relative to the industry, but also has several of its own policy-related strategies in process.
You don’t have to agree w/ my conclusions or assessments – behind the facts which are not disputable – but you do have to recognize that I have a track record in watching and predicting events in the airline industry which is far better than many Wall Street industry analysts.
I agree with Gary that I expect and appeal, especially since there is no way to unravel the NEA within 30 days. That deadline alone makes me question the rationality of this decision.
I also agree with Gary that breaking up the NEA will be bad for consumers and only good for DL and UA.
I am not a lawyer but I think there are several reasons for AA/B6 to appeal based on what I have read. They defended the NEA strongly and I do not expect them to roll over easily.
That the judge noted the positive aspects and still decided against AA/B6 is not a sound decision in my opinion.
I disagree with those who have said B6 will not want to appeal due to the Spirit merger. The NEA is a bargaining chip for B6. I am not saying they will not walk away from the NEA. I am saying I do not think they will walk away for free. If B6 does take part in an appeal, that will give them negotiating leverage with the DOJ on the merger. They could potentially agree to end the NEA (within a reasonable time which is much more than 30 days) and maybe give up some slots to AA to get the DOJ to stop fighting the merger.
I do not expect them to just do nothing and throw thousands of passengers travel plans into chaos due to this decision. AA needs to fight this also, probably more than B6 does.
We will find out soon but I expect an appeal by AA/B6 and probably a stay for now as to not disrupt the summer travel plans of many customers.
@Tim Dunn,
You may well be a man of influence in regions I don’t visit, but when numerous commenters mock you on the blogs on which you participate, it’s because you’re not being taken seriously. It’s not hating the truth-teller, as convenient as it would be to see it that way. Rather, it’s criticizing the overwhelming one-sidedness of your interpretations.
You have not addressed any of the substance of why, in my experience, you evoke that reaction. To me, and apparently several others, you appear to be hopelessly biased, and that taints the trustworthiness of your analyses. I didn’t say you are never right, or even that I disagree with your conclusions. I take them case by case, and sometimes you make sense, and sometimes you don’t. You are certainly significantly better informed about the industry than I am, so I’m grateful for the information you provide.
I wish I could, however, rely on you as an analyst, and that I can’t do, because even if the underlying facts are correct, I don’t know if they’re being fairly presented, and what relevant facts are being omitted. And the reason I even have these doubts is because when your conclusions take you only in one fully predictable direction — that Delta can do no wrong, and no one else (except maybe Southwest) does anything right — you’re a booster, not an analyst, and once I see you that way, I’m going to question everything about what you have to say. I do believe that you genuinely believe in your objectivity and the merit of your arguments, but the uniformity and absolutism of your conclusions renders them implausible. And it makes me wonder whether your conclusions flow really do flow from the facts, rather than your (unacknowledged) feelings.
It’s helpful for you, though, that you have a principle to support this uniformity: degree of profitabliity. I don’t understand your religious-like devotion to the idea of amount of profitability being the only meaningful measure of company quality, and I think it blinds you from a more sophisticated analysis, and it enables your unerring trust in your own rightness and your ignoring or outright dismissal of countervailing views, to the detriment of your ability to analyze and persuade.
Obviously, a company needs to be profitable, and I never said otherwise, and I don’t know why you think I don’t know how the free enterprise system works. I have owned and operated a business for 20+ years, so I think I probably have some ideas. But I fundamentally disagree that a company that provides a product is only measurable by its return to investors, with the quality of its product as experienced by its customers being a secondary or tertiary or even irrelevant concern. I philosophically think it’s a destructive and short-sighted way of thinking about how a business should prioritze its decision making, but this is a personal opinion, not a factual delcaration, nor a dismissal of another perspective.
I have absolutely no comment at all on AA/B6/NEA and the rightness or wrongness of your prediction. I am speaking more generally to your Delta fanboyism, perfectly on display in your response to John, and having very little to do with the topic at hand. It makes you hard to take seriously, as much as I’d like to.
In other news, AA has DFW NYC DOH Business Class awards available in September ranging from 88k to 94k on September 3-4. The mileage was even lower on some other days but those appear to be booked already. It looks like all the days require an overnight connection in NYC and some of them require an airport change ie. DFW EWR on one day and then JFK to DOH on the next. This might be good if you want to break up the trip or do some sightseeing in NYC on the way.
I just thought I would share. Maybe Gary can see some even better options but AA usually wants 150k or more miles for J Class to DOH.
FYI the average high temp in DOH in September is 100f.
Good luck.
Can anyone give us an example of a situation where an airline merger or code-share produced measurable benefits for passengers? Right now fares are rising and capacity is still down on a lot of routes vs pre-pandemic.
I know this is probably against your world view, but in my opinion, we were much better off as passengers/consumers when NW and DL were separate, when American and USAir were separate, and when CO and UA were separate.. More competition, better frequent flier programs, and more capacity. I would love to see these broken up too.
ivan X
and yet after all of those words, I predicted here that the NEA would not succeed despite many people including the author of this blog defending it – as he has even to this article.
The NEA was an attempt for AA and B6 to try to compete against DL, the largest non-NEA airline in the NEA markets – the judge himself recognized that – but they used illegal methods to do that.
I have been right about multiple other things including that the global airlines would do better than everyone else gave them credit for – and that has been the case.
And, quite simply, if you haven’t bothered to see that I have said a number of very positive things about AA and its strategies, you have just been too biased in your reading to understand what I have written. If I regularly have positive things to say about 3 of the big 4, then that hardly counts as a single-airline bias.
The NEA is dead and it is another strategic failure for AA – but AA is doing very well elsewhere and can salvage itself from the ashes but will likely lose further share to DL in BOS and NYC as a result.
@Tim Dunn – the NEA isn’t dead until the almost certain appeal is heard. Thank goodness for our legal system and the right to do so. Particularly, in light of the unreasonable and unrealistic timeframe of 30 days so ordered by this judge.
Tim Dunn, as just another person, I’m absolutely capable of bias, and I’m sure exhibit it sometimes when I’m unaware of it. That said, I don’t know why I would be biased against you, since I don’t know you, nor towards any airline, because they’re just airlines, and I have no interest in playing armchair airline executive. I’m only interested in whether the products and services being offered are valuable and enjoyable to me.
I would dispute, based on my exposure to your comments on blogs, that you “regularly have positive things to say about 3 of the big 4.” If I’ve seen it, and I’m not sure I actually have outside of your comment about AA right here, it’s been vanishingly scarce. I also can not think of one instance where you’ve ever said anything remotely critical of DL, which is the other side of the not being biased coin. I’ll keep my eyes open out if my own desire to be fair, however.
I never said that your predictions about AA or anyone else were wrong, and I don’t particularly care whether they are right. I didn’t even address them.
sorry, but I simply don’t get the logic that bias is measured by the amount of negative that is said about anyone or any company.
Bias would be measured by the inability to say nothing POSITIVE about anyone except Delta – but that is clearly not the case. If you haven’t seen what I have said repeatedly on this site about AA’s change strategic direction, then it is you, not me, that isn’t seeing the big picture.
And specific to the Northeast, AA and B6 entered into a partnership that AA knew was legally problematic but they did it anyone.
The judge recognized that DL was the common competitive target – but he specifically said that is not justification for breaking the law.
Just as was true w/ UA’s decision to not fully comply w/ slot restrictions which led the FAA to eliminate full slot restrictions at EWR, UA’s decision to leave JFK, and US’ decision to engage in the slot swap w/ DL that clearly benefitted DL far more than US even if it had continued as planned, DL has benefitted heavily from the strategic failures of every one of its major competitors in the NE for years.
I’m not sure it is really bias to not see or say that.
Rachel.
I am sure there are some that want to see an appeal tried but 1. AA and B6 both have to start thinking about succeeding in a world in which the NEA is not an option. clinging to the hope of an appeal costs money but more importantly time. Competitors just gained the upper hand. Regaining business will be much harder with a judgment in hand.
2. The judge provided very strong legal basis for his ruling. You can’t just appeal because you don’t like a ruling. You appeal because something significant was overlooked or incorrectly read. Feel free to let us know the basis for an appeal.
3. 30 days is actually pretty generous to unwind an illegal activity. AA and B6 should and probably are talking now about how to create an AA/AS type agreement and the appropriate slot leasing – which they should be doing. AA and B6 can cooperate but just not the way they are now. The DOT and DOJ will support emergency requests for transition planning but revenue sharing, capacity planning and slot swapping have to end in 30 days. And it is not a given that those would be allowed to continue for any period of time even if an appeal is filed.
Ivan X
There’s no point helping Tim Dumb with his lack of self awareness. Many have tried, now we just mock because besides that what’s the point? An analysis holds no value when the analyst is blinded by his own confirmation bias. I wonder if he knows all the effort he puts into typing his little diatribes across multiple sites is only met with a rolling of the eyes of indifference.
you mock because you are incapable of or do not bother to present a viable counterpoint.
If I am wrong, you should be capable of bringing a cogent argument to the table.
and specific to THIS topic, again, tell me why I should NOT be given credit for recognizing 3 years ago that the NEA would go nowhere?
@Tim Dumb
I agree with half the stuff you say……the problem is we know what your opinion is going to be before you even present it. You have your default view and it’s unwavering. That is why you are mocked and dismissed. Ivan X is just learning this, that it’s better off ignoring you because you can’t resist your confirmation bias.
1. I find it ironic and laughable that some people say they don’t care what I say but then bother to write telling us why they don’t like what I have written.
2. I have participated in aviation social media for about 20 years and the story is still the same. I come w/ facts, turn them into valid opinions based on those facts, and 90% of the people I debate are people that don’t bother to bring any facts to the discussion – and then complain when I come up w/ logical conclusions.
3. If you agree w/ what I write, then the issue isn’t any bias on my part but your refusal to admit that I got it right. I am more than happy to admit that someone else might have a valid point but I am not going to not say what I believe to be true or the facts because some people can’t accept the facts.
Once again, I said 3 years ago the NEA wouldn’t work. Instead of saying that I am mocked, tell me the facts and logic that cause you to differ w/ my conclusions and facts.
AA and B6 made a huge strategic blunder in trying to create a partnership which court documents show AA knew was legally problematic. Despite their joint intended goal to compete stronger against DL, DL is itself in a stronger position as each of AA and B6 have been told to desist from the key components of the partnership after both have turned major parts of their operations over to the other.
Why is it so hard to admit that the NEA was a bad idea, I saw it coming, and AA and B6 are now weaker while DL is stronger? Just as with UA and EWR and JFK, DL has gained as much from other airlines’ strategic mistakes as it has because of DL’s own actions.
Ahhh Tim,
This isn’t a critique about B6 or AA nor the NEA, it’s about you. You are one of those types that take themselves way too seriously to admit you are probably wrong as often as you are right. People like you work themselves into an early grave by getting wrapped around the axle about stupid inconsequential stuff that you think you know about but you don’t. This is more a lesson for Ivan x than you buddy. Have fun shouting at the clouds!
@Gaybepilot @Tim Dunn thanks guys. I am collecting facts and drawing conclusions from them!
YOU are the one that can’t admit that I was right and still am about the NEA – and because you can’t admit it, you have chosen to turn the topic into something about me even as you act like you don’t care.
You care deeply – which is why you keep coming back w/ attacks on me and continue to post nothing about the topic.
Just walk away if you can’t contribute to the topic.
Haha Tim got the smacked down!!!!! Hahaha
Bring AirTran back!! Lol
What an absolute horror show it was to allow SW to buy it and they gut the Atl network
I’m a captive ATL flyer.
Delta—berry-berry happy
Sw—f them
Ha no I agree ur right about the NEA,, it was destined for failure from the beginning, I never said otherwise. It’s your attitude, smugness and arrogance we ALL are mocking…… keep shaking that fist at the cloud old man! Ivan X hope ur still watching!
@Ivan X
Tim Dunn and I operate on the same ATC frequencies, per se, but he’s totally off base with some off his comments on this post. Especially on the points where he argues that DL is becoming less and less profitable relative to its peers. We may operate on the same frequency, but it’s clear he forgot to read ATIS today.
and the endless list of throwaway user names pops up again.
You folks are fixated on me.
Instead of just admitting that the NEA was doomed – which the gay pilot finally did – he came back for one more swipe.
If you don’t like what someone posts or the ATTITUDE with which they post, just walk away.
Better yet, contribute to the discussion instead of focusing on other users.
You BOTH need help. Walk away.
But I do thank you for admitting that the NEA was doomed from the beginning.
It isn’t arrogant to note that I said that 3 years ago, esp. since you seem to think dragging up the past is acceptable if it suits YOUR POINT.
I don’t have a point to make about the NEA. I have a point about your Delta fixation and your inability to engage with the criticisms brought to you. You claim that others should respond based in facts when in fact you’re all about emotion. You respond to what serves you and you ignore what doesn’t.
You want to be right about the NEA? That’s fine, it doesn’t cost me anything. I never said you were wrong about it. I never even said you were usually wrong. I’ve said you have some good things to say like five times now. I’ve even tried to be respectful, and acknowledge the depth of your knowledge, to little avail.
The world isn’t all winners and losers in a zero-sum game, dude. This is the credit you want? To be the smart guy on the internet about a thing, with no interest in how you make others feel in your engagement with them? No wonder you elevate maximum profit over customer happiness..
One thing you are right about, though, is that we all do pay too much attention to you, and I’ll do my level best to take your suggestion and walk away, since you’re not actually interested in an actual responsive back and forth. You’re interested in a monologue, and a repetitive one.
So, later, but nonetheless, thanks for whatever factual knowledge I happen to glean or insight I gain amidst the swath of your unacknowledged obsessions, that diminish your potential influence in and value to a community.
If you have read ANYTHING I have written – which is alot – you would see that I SPECIFICALLY said that I believe that someone does NOT have to lose in order for someone to win.
And , if you read ACCURATELY what I have said about AA and B6 just in replies to THIS ARTICLE, I have said that they will be fine. But they made a strategic mistake and it is actually helping a competitor that they joined together to try to beat.
Your fixation with me instead of an ability to focus on the topic and reply to what I wrote – not what you think I wrote – is pathological. Same for the other guy.
Step away. Call it a night.
Nobody cares what you think about me.
Absolutely. No. One.
Except people that have the same distorted view of the world as you.
And if you can’t see tomorrow morning what a fool you have made of yourself in your endless replies about me in this thread, get help
Ivan X,
I hope this goes to show the twisted nut you are dealing with. He will not stop until you 100% agree with him, he accepts nothing less, not 75%, not 98%, he has a totalitarian mindset. You must agree to every nuance of his opinion lest he will argue endlessly! Best to warn people to pay no attention to him. Didn’t take long for him to expose himself as a nutcase, he can’t help it. And when there is no one left to scream at, even Gary for that matter, he will continue to yell at inanimate objects until they agree with him. If I was flying with him I would call “pro-stands”, cause there’s a screw loose! I find it funny how from the get go I never disagreed with him, only his disagreeableness …. Think of him like a hemorrhoid !
@Tim…. That didn’t take long to turn yet someone else against you! Ur like the turd in the punch bowl mate!
Wow TD Ur not coming off well here, u might wanna stop
The NEA is dead
Cranky Flier has an outstanding on it and most significantly he admitted he was wrong in believing it was defensible before.
The shrill and shrieking from those that cannot accept they were wrong and someone else was right is incredibly sad.
The NEA is dead. Those that realized that three years ago have further established themselves as those that truly understand the airline industry.
The NEA is dead and CF accurately notes that the likelihood of a successful appeal is low.
Barron’s carries the following quote from Jamie Baker, one of the leading airline analysts.
“Delta’s methodical long-term pursuit of dominance in New York and Boston suggests to us that it is optimally positioned to further increase its share of consumer and corporate wallets,” J.P. Morgan analyst Jamie Baker said. “As divorced entities, neither American nor JetBlue can offer the same network and loyalty opportunities for passengers as can Delta,” he added.
and another quote from the ruling
Essentially, American and JetBlue defend their partnership by broadly urging that “bigger is better,” and by claiming that they will be able to match or overtake (or, as they say, “compete with”) Delta only if they are permitted to stop competing with one another. That is not the kind of “competition” valued and protected by the Sherman Act.
Everyone except a handful of sore losers cannot accept that Delta was the target of the NEA and is the biggest winner by its unwinding. Saying that out loud doesn’t show bias but true strategic thinking. Those that continue to argue that Delta or United influenced the decision do so solely because they can’t accept the strategic incompetence at AA and B6.
@Tim Dunn apparently doesn’t realize his Jamie Baker quote shows why the judge’s ruling reduces competition in New York. Odd.
“Everyone except a handful of sore losers cannot accept that Delta was the target of the NEA and is the biggest winner by its unwinding.”
Of course becoming competitive with Delta – which they needed to do to be profitable – was the idea behind the NEA.
@Tim Dunn – Cranky Flier basically accepts that the judge *is right* but that’s not at all clear. Was the judge right to treat allocation of routes as per se violations of law as opposed to focusing on actual consumer harm? Was the judge right to be so dismissive of the airlines’ expert witnesses, simply dismissing them as biased and dismissing their working with airline-produced data? These are very much questions for an appeals court… if JetBlue is willing to litigate to reach a final disposition.
Gary,
thanks for jumping back in and dealing w/ the issue at hand.
The judge made it increasingly clear that there is no justification in law or practice for 2 companies to collude in order to compete against someone else – which is exactly what the DOJ showed AA and B6 did.
There is no basis for an appeal and CF shows why – there are contradictory statements from AA and B6 about their willingness to compete against each other.
An appeal is based on a flawed interpretation of the law. You have yet to show us where the flaw is relative to the law.
Continuing to repeat that AA and B6 are weaker because they can’t collude is counter to law and no judge in America is going to say otherwise.
I am retired from the practice of antitrust law. I spent 8+ years with the FTC, 26 years as senior counsel for antitrust in house with a Fortune 50 corporation, and a few years after that “of counsel” with a “Big Law” New York firm. I think I know my way around the antitrust world.
I disagree with Gary and those who argue that the American-JetBlue NEA should be allowed because it would augment competition by providing a counterweight to Delta and United in the Northeast. Antitrust law does not allow such an argument to prevail, and Judge Sorokin was correct in finding so. Further, Judge Sorokin’s 94 page opinion represents mainstream antitrust law and economics.
First, it is per se illegal for horizontal competitors in a market (and both the DOJ and the airlines stipulated that the antitrust market was commercial passenger air service in the Northeast United States, primarily New York and Boston – see, Slip Op. at 75), to allocate markets between them by agreement – e.g., “you take the south side and I’ll take the north side”. U.S. v. Topco Assoc., Inc., 405 U.,S. 596 (1972). Per se illegal means that the Court may find the practice illegal and enjoin it without examining any of its market effects. This is precisely what the NEA did. Slip Op. at 73-74.
But the Court went on to examine the reasonableness of the NEA, and found it to harm consumer welfare, by limiting output and likely raising prices over time. Slip Op. at 68. It especially harmed competition by eliminating JetBlue as a historical price and market disruptor, see, e.g., Slip Op at 13-14. While the Court did not find (or, apparently, have before it) evidence of actual pricing increases, the NEA elimiinated any incentive to compete on price between the two airlines. It even went so far as to restrict competition, by eliminating the free carry-on in Blue Basic by JetBlue. See, Slip Op. 37, ftn 49. It raised JetBlue’s costs substantially, see, Slip. Op. 37-40, particularly at ftn 49. “Though American and JetBlue do not discuss the fares they will
set, they otherwise strive to provide a seamless product by operating, as much as they can, as a
single airline would. Put simply, the NEA has replaced direct and aggressive competition
between American and JetBlue on nearly every front (including routes, schedules, and capacity)
with cooperation. This, in and of itself, is a fundamental assault on competition and an actual
harm the Sherman Act is designed to prevent. See, Impax Labs., Inc. v. Fed. Trade Comm’n, 994
F.3d 484, 493 (5th Cir. 2021) (“Eliminating potential competition is, by definition,
anticompetitive.”); Doc. No. 320 ¶ 36 (citing additional cases).” Slip Op. at 68.
Second, elimination of two competitors in order to make them stronger against Delta may make business sense (and again, maybe not), but it is not a reason allowed under the antitrust laws to make lawful otherwise unlawful conduct. As the Court specifically observed, “The problem for the defendants is that this purpose—strengthening their own position against one or two rivals—is not a valid justification, and cannot render an unreasonable restraint on trade reasonable, under the Sherman Act. That is so because the purpose itself substantially and unreasonably interferes with, rather than promotes, the operation of the free market. The defendants’ desire to keep pace with Delta or to replace it as the strongest domestic competitor in the northeast might be “procompetitive” in the business sense of the word, but it is not on these facts “procompetitive” under the law. Cf. Grappone, Inc. v. Subaru of New Eng., Inc., 858 F.2d 792, 794 (1st Cir. 1988) (observing that “the antitrust laws exist to protect the competitive process itself, not individual firms”).
Where Delta is a strong competitor based on its superior performance, business expertise or consumer preference, it is not the province of antitrust law to prevent that success. See, Slip Op. 81 at ftn 94. Any defense based on combining two competitors to confront a stronger competitor is usually doomed to failure.
Third, Gary makes four points above in favor of the NEA. All of them are wrong legally and factually:
1.”The NEA increased the number of strong competitors in the market from 2 to 3 which is good for consumers.” This isn’t true. All four of the existing competitors had the financial wherewithal and resources to be strong in both Boston and New York. American chose not to do so. And a market definition limited to “strong competitors” is economically a non-starter, has no basis in antitrust law, and chooses to ignore that competitors can grow internally.
2. “The NEA required American and JetBlue to increase the number of seats flown in the market, which they couldn’t legally do by adding flights so they had to fly bigger planes. That’s good for consumers on its own.” Again, factually wrong. As Judge Sorokin found, “Capacity growth that comes from American’s upgauging of its own regional jets is growth the evidence suggests American could have pursued, and planned to pursue, with or without the partnership. E.g., Trial Tr. vol. 7 at 154 (“Look, could we have upgauged [without the NEA]? Sure we could have.”). The same goes for some amount of JetBlue’s additional New York flying, which JetBlue intended to pursue via a slot lease to which American already had agreed. See PX 0527 at 1 (confirming JetBlue’s independent long-term plan, as of mid-June 2020, included increased flying at JFK using slots it had arranged to lease from American apart from the NEA)”. See, Slip Op. at 87, ftn 104.
3. “And the requirement to offer more seats (increase supply) means a downward pressure on prices.” Agaiin, such a conclusion is belied by the facts. The evidence adduced by the Court showed that the NEA actually precipitated a decrease in seats on BOS-LGA: “See Trial Tr. vol. 9 at 48-49 (predicting JetBlue “will eventually have roughly the same capacity” on Logan-LaGuardia “that existed in the market” before the NEA, but not until “some time between now and 2025”); PX 0792 (describing plan for American to stop its four daily Logan-LaGuardia flights at the start of 2022, for JetBlue to continue offering only the same twelve daily flights it already offered until summer 2022, when it would increase to fifteen daily flights); see also PX 0322 at 3 (reflecting that both carriers plan to reduce frequencies in LoganReagan, an overlap market, between January 2022 and the time when the NEA reaches its “steady state”). Though the defendants characterize this as a temporary reduction that will be remedied when they have eventually obtained additional aircraft needed to bring service back up to pre-NEA levels, such hope and speculation does not change the fact that the capacity reductions have occurred and (as far as the record is concerned) presently remain.” Slip Op. at 36-37
4. “So far from giving American and JetBlue some kind of monopoly, breaking up the deal protects the effective United-Delta duopoly in New York. This ruling undermines competition, rather than protecting it.” Again, Gary is wrong factually and legally on this point. No one argues that American and JetBlue will have a monopoly, the argument is that consumers have less choice, and prices have and will increase. JetBlue has been famous as a disruptor. See, e.g., Slip Op. at 77, ftn 88: “Evidence describing the “JetBlue Effect” further supports a finding of market power here. Studies have demonstrated the phenomenon works in both directions—that is, JetBlue’s entry in a market triggers a drop in fares, and JetBlue’s exit from a market triggers a rise in fares. In a region where the defendants’ resources are substantial, their presence is strong, and JetBlue’s role in the market is unique, collaborative decisions about whether JetBlue should continue to serve or exit a market—and about whether JetBlue should or should not enter a new market—are exercises of market power capable of influencing fares in those markets.”
Simply put, I think Judge Sorokin got it right. I won’t predict what will happen in the First Circuit (although it appears there are NO Trump appointees on that Court — there are two Obama appointed judges, two Biden appointees and five judges who have taken senior status).