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Written by Rajesh Kumar Singh, David Shepherdson, and Diane Bartz
CHICAGO (Reuters) – JetBlue Airways is seeking to protect a planned $3.8 billion takeover Spirit Airlines (NYSE:) said on Wednesday that it would follow a US judge’s order in May to end its alliance with American Airlines (NASDAQ:).
The New York-based carrier said, while it “strongly” disagreed, it would not appeal the court ruling.
JetBlue said it notified American last week of its decision to end the three-year-old alliance, which allowed the two companies to coordinate flights and pool revenue.
American said on Wednesday it still plans to appeal the ruling. American is the largest US airline by fleet size, and JetBlue is the sixth largest.
JetBlue said ending its alliance with the US raises objections from the US Department of Justice (DOJ) that have led it to file suit to block a merger deal with Spirit, which would be the largest in the US airline industry since the merger of American and US Airways. in 2013.
“This decision will enable us to focus more on our merger with Spirit,” CEO Robin Hayes said in a staff note.
The Justice Department declined to comment.
Andre Barlow, an antitrust attorney for Doyle, Barlow & Mazard PLLC, said he doesn’t think terminating the alliance will change JetBlue’s prospects in its legal battle over the Spirit deal.
“I don’t think it helps,” Barlow said. “It’s better for the Department of Justice.”
Alliance strategy setback
The dissolution of the alliance is a setback for the United States’ strategy to increase revenue by relying more on alliance partners to carry passengers in uncompetitive markets.
The Northeast Alliance with JetBlue helped Americans compete in the New York market, where it was losing money. It has allowed Americans to steer clear of unprofitable routes while maintaining a presence in New York and allowing it to feed the traffic for its global partners who travel to the region.
America has yet to articulate plans for the capacity it gave JetBlue. The company may now have to rebuild capacity or cut international flights out of the region.
On May 19, US District Judge Leo Sorokin in Boston ordered JetBlue and American to end the partnership, saying it “significantly reduces” competition in the local market.
The Justice Department filed a lawsuit in 2021 to retract the Northeast Coalition, which was announced the previous year. She called it a “de facto merger” of US operations and JetBlue’s Boston and New York that removed incentives to compete and would end up costing consumers an extra $700 million a year to fly out of the area’s congested airports.
JetBlue said its decision to cancel the alliance would not result in any immediate changes to customers. The company said it expects to work on a cooling plan that will protect consumers.
But without that alliance, Hayes said JetBlue would likely need fewer staff in New York and Boston. He promised that the company would manage staffing levels through natural attrition, relocation options, and reductions in new hires rather than furloughs.
