US DOJ Sues American Airlines and JetBlue

Today the Department of Justice sued American Airlines and JetBlue for their alliance. Basically the airlines working together raised prices on tickets and reduced flight options for passengers flying between major cities and northeastern cities. They say that the airlines should be competitors instead of allies because of the shortage in the industry. There is a shortage in pilots and crew members and this alliance made it easier for American and JetBlue to survive with frequency reductions on routes because of the alliance. DOJ says this alliance will cost hundreds of millions of dollars for passengers traveling domestically.

Read more here:

19 Likes

Good.

Alliances and friendships don’t fuel innovation, competition does. And when you have no competition, there’s no reason for the airlines to try and be the best they can be — in this case that means they can cut route frequency and gouge prices. This may not help the airlines in the short term, but in the long run the industry is better off with more competition instead of less.

13 Likes

I agree, it makes sense to me. Imo this shows how much American Airlines really doesn’t care about the passenger experience and why I’d rather fly Delta or United.

3 Likes

Not exactly?

American + Alaska West Coast Partnership:

  • Allowed American to introduce long-haul routes out of Seattle including direct competition against Delta’s Shanghai flights + the first Seattle to India flight, which allows for major businesses in Seattle and Bangalore to become more easily connected. If anything, the Seattle to Bangalore route is the definition of innovation.

American + JetBlue Northeast Partnership:

  • Allowed American to use JetBlue’s slots to launch new international flights to Bogota, Cali (breaking Avianca’s monopoly), Athens, Tel Aviv, (returning) Rio de Janeiro, Delhi, Santiago (breaking LATAM’s monopoly), and more.
  • Allows JetBlue to tap into American’s frequent flier base in the New York City/Newark area, which fuels JetBlue’s growth in Newark Airport and promotes them to continue adding service and disrupt monopolized routes United was charging high fares on.
  • JetBlue uses American’s LaGuardia slots and enters routes with a heavy Delta presence, which can lower fares given the “JetBlue Effect”.
  • Essentially, JetBlue and American were distant third and fourth-ranking competitors in the NYC area compared to Delta and United. This partnership allows them to execute “innovative” decisions that weren’t feasible without each other. They become a “real” third-ranking competitor. From JetBlue’s announcement today:


American + Qantas Partnership (right up until COVID):

  • Broke Air New Zealand’s monopolized (and important) Auckland to Los Angeles route
  • Allowed for Qantas to connect Chicago with Australia
  • American would have launched the only Christchurch to U.S. flight, which allows the South Island of New Zealand a convenient option to reach the U.S. and beyond.

Arguably, I don’t think there’s many stand-out examples of this with the American/JetBlue partnership. AA did drop SAN-JFK in favor of Alaska and JetBlue flying the route. I believe AA has cut back on JFK-SFO temporarily, but despite the lower competition, JetBlue continues to innovate, especially product-wise. United (somewhat unrelated) even entered JFK-SFO/LAX this year, giving the routes even more competition.

In my opinion, terminating the American/JetBlue alliance would continue to allow Delta and United to maintain short and long-haul strongholds in their respective NYC hubs. The combination of American and JetBlue in NYC would allow JetBlue to fiercely grow short-haul markets while American competes against Delta/United’s long-haul flying. Essentially, American/JetBlue becomes the “true” third competitor to Delta and United.

13 Likes

I mean, they’re still a business trying to not go bankrupt and make money, like most businesses

It’s funny you bring this up because I just did an analysis of this yesterday for one of my senior classes. It focused on potential benefits and negatives of the situation, the same as the summary you wrote.

DOT approved this venture at the behest of American and JetBlue, but it was done under the prior administration. DOJ sued in turn after the next one came in, which doesn’t come as a huge surprise due to the current administration’s tendency to want to crack down on monopolistic behavior. Then add in the dynamics of two government agencies under the same administration duking it out on opposite sites of the coin and the situation becomes more complicated.

Eager to see how this plays out. Fun times!

4 Likes

Oh wow, totally didn’t see that one coming…

I actually may fly on one of the first flights on that route.

1 Like

Air New Zealand use to fly from Christchurch to Los Angeles with the 747-400 back during the 2000s.

3 Likes

That route was never monopolised, Qantas during the 2000s did operate Auckland to Los Angeles using 747 and A330 but later ceased due to not enough demand. But however during even now doesn’t mean its monopolised by one carrier, people are still able to connect through to Nadi (Fiji), Sydney, Melbourne and Brisbane to get to Los Angeles.

1 Like

Most interesting.

If Qantas dropped AKL-LAX which left Air New Zealand on the route, that’s a monopoly for the nonstop. Sure, people can connect through other airports, but it’s at a greater inconvenience for them, such as needing to go through customs when connecting through the destinations you listed. American entering AKL-LAX in the mid-2010s broke that monopoly and gave customers a second nonstop and convenient option, likely leading to lower fares from Air New Zealand as well.

1 Like

Doesn’t mean its necessarily monopolised at all! Qantas (Oneworld Allliance) are still able to tap into the New Zealand market with cheap fares by using their hubs and vice versa for Air New Zealand (Star Alliance) would for the Australian market, by making each of their country as connecting hubs and connecting the customers onto their final destination. Pretty much same kind of system you have in USA but just not connecting between another country.

You can still get customers to your hub by flying to them and then get them to their desired destination but yes it does give some inconvenience due to flight duration and customs crossing because of country border however it doesn’t stop the customers wanting to travel the long way. Most people will be enticed by the fares the airlines offer mainly and don’t really care how they get their destination. Offering really good product, service and pricing strategy is key to the alliance success since tourist is hard to come by in these parts of the world given are far away from most countries.

Theres a lot of things to consider for starting up a new route especially in these parts of the world, one component is that there’s a tax system here for mainly North American tourist just to maintain control of the growth in tourist coming here, because we don’t want our country to be inflated with too many tourists. I’d imagine it would be the same in Australia and Fiji because of growth and environmental reasons. That why a lot of North American routes to the Pacific is really expensive and its hard to travel here. However can’t make whole other list of factors because otherwise this would go on and on. 😅

Also Qantas, Jetstar, American Airlines and Fiji Airways are way more monopolised compared to Air New Zealand, Air Canada (However only focuses on Canadian routes) and United Airlines, the Oneworld Alliance before this pandemic had 13 routes altogether Pacific to USA routes among them, even at this current time still hasn’t changed by much. For the Star Alliance they had 12 before the pandemic and even now Oneworld Alliance is still the dominant carrier compared to Star Alliance during this pandemic.

There’s a massive reduction in Star Alliance routes, there’s up to 5 operating currently as passenger flights then extra 2 flights operating as cargo which equals 7, for Oneworld Alliance routes 9 which operates as passengers/cargo. Pretty much the whole time Oneworld Alliance has been more dominant compared to Star Alliance due to the number of routes they operate during their times.

I don’t think you’re understanding @Ishrion’s point here, he specifically mentioned monopoly for the nonstop on the previous post.

Also, this can be very much incorrect considering the fact that you are not focusing on one specific market here but rather large swaths of regions from the Pacific to the USA. Even then, that information would be incorrect considering Auckland alone has 7 Star Alliance nonstops to North America as compared to only 2 routes of Oneworld, both of which are AA to LAX & DFW. Add 5 more of Star Alliance routes from Sydney to North America, 2 more from Melbourne, and 1 more from Brisbane, and then 1 from Papeete and oh wait, that’s 16 and I’ve forgot that Hawaii is part of Oceania and the Pacific.

That would set up an extremely subjective comparison which goes beside the point of the Auckland - Los Angeles nonstop route. AA being the only US carrier from another alliance (Oneworld) flying nonstop on a route that only Air New Zealand (Star Alliance) flew directly.

Also, your statement of Oneworld flying 2 more routes does not necessarily represent their “dominance” over the route. There are a lot more factors that you’ve not accounted for here, such as load factors, pricing, durations, and so forth on the success of the route. Also, you have not mentioned which specific region you are talking about here (whether it’s Auckland specifically or the Pacific - USA region). Much is missing here that doesn’t give us the entire picture, thus thae assumption that 2 more routes makes Oneworld more dominant would not be correct unless backed by proper evidence/statistics.

2 Likes

I do understand what @Ishrion is referring too! Having a direct (non stop) route doesn’t mean its solely controlled by one carrier. You can have another airline operating out of another base instead of very same base as your competitor and still be able to maintain cheap fares. Whereas with JetBlue and American case its different due to specific focus on domestic market (well mostly). With them it’s a different story because of their alliance and keeping their competitors out of reach on the East Coast and then making price hikes for the customers due how many bases their alliance serves overall.

The Pacific is one region I’m stating as the overall market here, Australia is part of the Pacific if you didn’t know. Air New Zealand often refers it to as the Pacific. Air New Zealand and Qantas generalised target market is normally based on Australians and New Zealanders. Whereas with American Airlines and United Airlines I’d assume it would be Americans but can’t be certain for sure since there’s no source. Hawaii on the one hand is more part of USA market than Pacific market. Air New Zealand often refers too it, Idk about Qantas!

Oneworld alliance and Star alliance pacific routes is a very good comparison to this topic since it distinguish between direct or non stop. If one carrier is occupying one direct route then it doesn’t mean its monopolised which ever way you see it, you’re still going to be able to capture your competitors customers by using your own hub to create the routes and maintaining for a long period of time.

Where you’ve specified DFW as route, its not even in existent yet or has it been before the pandemic but sadly I doubt that I would run now due to NZ’s quarantine rules and facilities, along with NZ’s grim future with international travel would look like in the future.

Dominance can represent airlines alliance by type of routes they operate by how many times they are servicing routes for themselves and their alliance partner.

At this current time you can’t get load factors, market statistics and pricing due the airlines keep it confidential to themselves at these current times. Mostly with Air New Zealand they give out their overall performance each year, as I understand with your American carriers in every 3rd quarter, but this year there’s no stats or anything to show claim.

No offense, but you kind of missed it again.

The overall Auckland to Los Angeles market was “never” monopolized by a single carrier. Customers aren’t forced to solely fly on one airline and on one routing. There was consistently airlines offering connecting options through other destinations.

However, the nonstop Auckland to Los Angeles market was monopolized by Air New Zealand until American Airlines launched their own flight.

This is an important difference to customers looking for the most convenient and timely option. It’s a very critical factor for business travelers, which typically can make up the majority of an airline’s revenue on certain routes. The direct competition on the nonstop Auckland to Los Angeles routing upon American Airlines’ entrance likely led to Air New Zealand lowering its fares both in Business and Economy Class, leading to customers swaying more towards these nonstop options if they undercut connections.

1 Like

We didn’t specifically state all non-stop route are monopolies. We are specifically talking about the AKL-LAX nonstop route that directly serves both cities without a stop. ANZ used to be the carrier. that had control on that route before AA launched their own nonstop route between AKL-LAX. I don’t see where this comes from.

Did I not mention “5 routes from Sydney, 2 from Melbourne, 1 from Brisbane…”?

Again, you’ve missed the point of the nonstop segment.

Not without the proper statistics.

Then your assumption of dominance is not necessarily true unless you had the specific information and citation.