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The state’s Attorney General Rob Bonta this week joined the Department of Justice and seven other attorneys general in filing a lawsuit involving California airports against American Airlines and JetBlue.
The suit challenges what they call an anticompetitive joint venture known as the Northeast Alliance, that will affect high-traffic air markets such as San Diego.
As part of the code- and profit-sharing venture, the airlines coordinate which routes to fly, when to fly them and how many seats to offer – effectively merging their operations in certain markets, according to the suit.
In California alone, this “anticompetitive” venture is expected to impact at least nine airports with flights to and from the East Coast, costing California consumers hundreds of millions of dollars, Bonta said.
In the lawsuit, filed in federal court in Massachusetts, the DOJ and the attorneys general argue that the Northeast Alliance is an unlawful agreement that violates the Sherman Act.
“Fewer flights. More expensive tickets. Lower quality service. That’s what happens when one of the last shreds of real competition is eliminated from the market for air travel,” Bonta said.
He called the alliance “harmful to consumers nationwide” and aid he “won’t stand by when two of the largest U.S. airlines seek to merge their operations on some of the country’s most traveled routes.”
The Northeast Alliance covers all domestic American Airlines and JetBlue routes that begin or end in New York or Boston – routes comprising two-thirds of JetBlue’s business.
Along these routes, American Airlines and JetBlue will effectively function as a single carrier, the suit says.
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Consumers saw the impact of airline consolidation on price and quality first-hand following the American-USAir merger and Alaska’s acquisition of Virgin America, the attorneys general contend.
The DOJ and attorneys general argue that the new alliance will have similar impacts, substantially increasing market concentration on high-traffic routes to and from San Diego, Los Angeles and San Francisco.
The impact is also expected to be felt on smaller California airports, including Long Beach, Burbank, Ontario and San Jose.
The loss of competition on these routes is expected to result in hundreds of millions of dollars in annual consumer harm, the AGs said.
According to the suit, the alliance would be presumptively unlawful in over 100 markets where the parties now compete. It says eliminating the competition between the airlines, which has resulted in substantial benefits to consumers, gives American and JetBlue the incentive to raise airfares, reduce capacity and lower the quality of service.
The suit also alleges that the alliance’s revenue-sharing agreement will discourage the airlines from competing with each other on price because doing so would only serve to reduce the revenue each earns.
Instead, the alliance enables American and JetBlue to raise fares by exiting markets or by agreeing to cut the number of available seats and then sharing in their partner’s profits.
As the complaint describes, the alliance advances the trend in airline industry consolidation and capacity restriction by legacy carriers like American.
It also halts JetBlue’s previous disruption of the industry through aggressive capacity expansion, fare reduction, innovation, and better quality of service, the AGs say.
– City News Service
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