MIAMI – Several airlines including Spirit Airlines (NK) and Southwest Airlines (WN) have filed complaints citing competitive concerns about the new American Airlines (AA) and JetBlue (B6) partnership.
In July 2020, AA and B6 announced a strategic partnership involving Boston (BOS), New York (JFK/LGA), and Newark (EWR). This agreement paves the way for both airlines to expand their offerings in the Northeast US, commence codeshare flights, incorporate loyalty programs, and more.
On January 12, 2021, the two airlines confirmed the US Department of Transportation (DOT) approved this Northeast alliance. However, AA and B6 are required to meet specific conditions, such as divesting airport slots in JFK and Washington-National (DCA), expand capacity to meet growth commitments, and more.
Despite the DOT’s approval, this new partnership faces scrutiny from several airlines.
Spirit Airlines Initiates the Complaint
Just days before the DOT approved the AA/B6 partnership, Spirit Airlines (NK) filed a formal complaint pertaining to what the airline is calling “highly anticompetitive agreements.” NK requests for the DOT to conduct an investigation on this alliance to decide if there is an “unfair method of competition that must be prohibited”.
Spirit Airlines referred to competitive concerns on the BOS-DCA route, potential difficulties for small carriers to enter BOS, JFK, and LGA, control over prized airport slots, and more. NK complains about how American Airlines underutilizes its JFK slots by operating smaller aircraft. While DCA is not covered in the partnership, NK expressed concern on AA’s past slot divestures at the airport.
However, after the DOT granted AA and B6 the ability to implement their Northeast alliance, Spirit reinforced their complaint. Although American Airlines and JetBlue are forced to give up seven JFK and six DCA slot pairs, NK calls it minimal. The ultra-low-cost carrier claims this only represents 1.8% of AA/B6’s JFK slots and 2.5% of their DCA slots.
Spirit Airlines “respectfully urges the Department to immediately initiate the requested investigation”. With NK prompting the investigation, other airlines have chosen to chime in.
Southwest Airlines Joins the Complaint
Southwest Airlines (WN) submitted a letter in support of Spirit Airlines’ complaint and the necessity to launch an investigation. WN also cites competitive concerns about the AA/B6 partnership.
Following the DOT’s approval of the alliance, WN filed a supplemental document to their original letter. Southwest Airlines claims “the proposed Alliance would have long-term damaging impacts to both airline competition and the traveling public”. Specifically, AA and B6 will “effectively cease being competitors and instead become partners in the Northeast”.
Southwest Airlines also raises concerns about the Boston (BOS) to Washington (DCA) route. WN’s economists estimate fares on the BOS-DCA could increase by up to 40% because of the reduced competition with the AA/B6 partnership. WN proposes the DOT should divest 15 slot pairs at DCA instead of six in order to “help mitigate the competitive harm of the alliance”.
Additionally, while the DOT has chosen not to divest New York LaGuardia (LGA) slots from AA/B6, Southwest Airlines requests a divestment of 16 LGA slots. WN concludes its document by asserting the DOT should reexamine this Northeast partnership.
United Airlines Takes Advantage
United Airlines (UA) is the third airline to comment on AA and B6’s alliance. However, unlike Southwest Airlines, UA requests the DOT to ignore NK’s complaint, suspend the partnership, and review it with a more informal process.
United Airlines does not believe a formal investigation is necessary. Instead, the DOT should review the Northeast alliance consistent with how they have evaluated partnerships in the past. UA requests for the “release of all relevant and unredacted agreements” and allow parties such as airlines and organizations to comment on the DOT’s decision before AA/B6 implement the partnership.
However, even if the DOT keeps the agreements proposed by AA/B6 private, UA will respect the decision. Additionally, with the DOT set to divest slots, United Airlines wishes to be eligible for JFK Airport slots.
United Airlines recently announced it would return to New York’s John F. Kennedy Airport after abandoning it five years ago. Because of COVID-19, UA was able to secure temporary JFK slots. However, if the airline does not acquire slots when demand picks up again, they will be forced to leave JFK.
American Airlines and JetBlue Respond
American Airlines and JetBlue both responded and acknowledged Spirit Airlines’ initial complaint. B6 filed a document seeking to have the DOT dismiss NK’s request for an investigation.
JetBlue claims both the DOT and the US Department of Justice (DOJ) rigorously reviewed the application for a Northeast partnership. AA and B6 complied with the DOT/DOJ’s requirements and reached an agreement.
JetBlue concludes its response to Spirit’s complaint with “If, after JetBlue and American have fully implemented the Northeast Alliance, any carrier or stakeholder wishes to file a complaint, they may do so on the basis of an evidentiary record of the actual competitive impact of the Northeast Alliance, rather than asserting theoretical hypotheticals not backed by any facts or evidence.”
American Airlines also recognizes the uncertainty behind this new alliance. In a recent SEC filing, the airline disclosed that the US DOJ and New York Attorney General are investigating this alliance to some degree. AA and B6 will cooperate with the investigations, but the two carriers will continue to implement the partnership.
So far, AA has already begun selling tickets for its new JFK to Athens (ATH) and Tel Aviv (TLV) routes, both of which are sprouting from this partnership. Codeshare flights are expected to be implemented within months.
American Airlines declares elements of this partnership may change as “no assurances can be given as to any benefits that we may derive from any of the foregoing arrangements or any other arrangements that may ultimately be implemented, or whether or not regulators will, or if granted continue to, approve or impose material conditions on our business activities”.
American Airlines Lashes Out
American Airlines has filed a new document lashing out at Spirit Airlines, Southwest Airlines, and United Airlines’ complaints. AA requests the US Department of Transportation to dismiss these objections.
American Airlines begins its response by emphasizing the fact that all airlines had nearly six months to submit a public comment regarding the DOT’s review of AA/B6’s Northeast alliance. However, just days before approval, Spirit Airlines requested its investigation. AA says the DOT already determined it was unnecessary to have a formal open-docket investigation.
Specifically, AA believes these airlines want the DOT to evaluate the partnership all over again, “but this time on their terms—namely getting access to highly confidential information from American and JetBlue about the details of the NEA”. AA follows by asserting that it is “not likely to change the outcome of the Department’s investigation anyway”.
While NK is concerned about the extent of AA and B6’s partnership, American states the DOT’s requirements are sufficient to combat anticompetitive effects. AA and B6 will “undertake significant slot divestitures and growth commitments” and “refrain from certain types of cooperation that could lead to anticompetitive effects.”
American Airlines calls out the three airlines that filed complaints, declaring that “it is hardly a shock that rival airlines would want more in the way of remedies, particularly slot divestitures that might go to them”. AA also singles out NK with “that is Spirit’s plan in a nutshell”.
Featured Image: JetBlue N2039J Airbus A321-271NX. Photo: Nate Foy/Airways