Over the past two decades the airline industry has witnessed a series of high-profile mergers, winnowing the sector down from more than a dozen major airlines to just four. Delta acquired Northwest; United acquired Continental; American merged with US Airways; and Southwest took over AirTran. In 2016, Alaska Airlines bought Virgin America to clinch the fifth spot, although it has never been able to compete at the same level as the Big Four.
This market consolidation has had far reaching consequences. Critics argue it has reduced consumer choice and cut off access to many of the smaller cities that minor airlines used to serve. Airlines, however, point out that these strategic moves helped to make the industry profitable again, creating thousands of jobs in the process. Nevertheless, by the end of the Obama administration, regulators and others in the industry decided to put an end to airline mergers.
All this changed when the pandemic began in March 2020 and air travel ground to a halt. With the industry experiencing unprecedented losses, JetBlue was forced to consider a buyout from American Airlines. Realising that regulators would be unlikely to approve a full-on merger the two companies struck a deal and announced the creation of the Northeast Alliance (NEA). Dubbed a ’pseudo-meger’ by competitors, the American/JetBlue partnership has come under heavy criticism since its announcement last summer. Companies like Spirit and Southwest, for instance, argued that the partnership will reduce competition at some of the country’s most congested airports. It therefore came as a surprise to many when in January of this year the U.S. Transportation Department (DOT) approved the deal.
Barely a few months after the deal’s approval The Wall Street Journal broke the news that the Justice Department (DOJ) would be reviewing the American/JetBlue alliance and could recommend the DOT revoke its permission. The DOJ is concerned that this partnership could lead to anticompetitive coordination and inflated fares at key traffics hubs. With an already small air travel market, the DOJ are wary of the consequences that such a partnership could have on the market.
The key issue for both regulators and competitors is airport access. In 2019 American and JetBlue flew a combined 44 percent of passengers into and out of Boston and 32 percent of passengers at JFK and LaGuardia. JFK and LaGuardia are two of the most congested airports in the country, with the limited access at each coveted by airlines due to the volume of passengers in the NY metropolitan areas and for the connections these airports offer across the country and the world. In response American and JetBlue have said they would be willing to divest some of their take-off and landing times at all airports. However, Spirit amongst others think this measure would not go far enough for the competitive benefit they will have.
In conjunction with this, JetBlue’s pilot union and the Air Line Pilots Association (ALPA) voted against the proposed partnership in February this year. As States Capt. Chris Kenny, chairman of the JetBlue unit of ALPA, explained in a statement:
“Job security, especially during turbulent points in our industry, is a main concern of every pilot. We train for years and spend nights far from home in order to be a pilot. For any agreement to proceed, JetBlue management must provide acceptable assurances that our jobs are safe and valued for years to come.”
Despite this hiccup, JetBlue has demonstrated they are committed to moving forward with the alliance regardless. This decision now lies in the hand of DOJ, at this point in time it is unclear which way the review will go.