Spirit Airlines Criticizes JetBlue-American Partnership in Court Testimony

“I view this as opening Pandora’s box,” he said.

JetBlue and American announced their Northeast Alliance in 2020, saying they could be a more formidable competitor against

Delta Air Lines Inc.

DAL -3.56%

and

United Airlines Holdings Inc.

UAL -2.98%

in New York and Boston by joining forces at those airports. The airlines sell seats on one another’s flights along certain routes, pool airport slots, coordinate schedules and share revenue from flights within the scope of the partnership.

The Justice Department, along with six states and the District of Columbia, filed an antitrust lawsuit a year ago, alleging that the partnership will dampen competition and cost consumers hundreds of millions of dollars in higher airfare. A trial is currently under way in federal court in Boston with Judge Leo Sorokin presiding.

American declined to comment on Mr. Kirby’s testimony, and JetBlue had no immediate comment. The two airlines have argued in court filings and testimony this week that the alliance hasn’t caused fare increases or reduction in output in the roughly 18 months that it has been in place, but has allowed them to offer more flights in the region. JetBlue Chief Executive

Robin Hayes

testified Wednesday that before the partnership, JetBlue had struggled to expand its position at LaGuardia and JFK, congested New York airports where the government controls takeoff and landing rights.

Spirit, a budget airline, has been a vocal critic of the partnership. During his testimony, Mr. Kirby read from an email he sent to Spirit executives after the alliance was unveiled, in which he wrote that the arrangement “reeks of antitrust collusion and backroom deals” for takeoff and landing slots at LaGuardia Airport and John F. Kennedy International Airport.

Last year Spirit urged the Department of Transportation to further investigate the partnership, arguing it would undermine the government’s previous efforts to boost low-fare competition in New York’s airports, leaving the vast majority of flying there in the hands of the largest carriers and their partners. Mr. Kirby testified Thursday that the divestitures JetBlue and American proposed to address antitrust concerns weren’t significant enough to give Spirit or another upstart a real foothold at JFK.

“It would take a massive amount of divestitures” to remedy the situation created by the alliance, he said Thursday.

Complicating the situation is Spirit’s planned sale to JetBlue, after the carriers struck a $3.8 billion deal in July. JetBlue’s commitment to the Northeast Alliance was a major stumbling block as negotiations between the two carriers dragged on publicly throughout the spring and summer. Before eventually agreeing to the deal, Spirit executives argued that JetBlue wouldn’t be able to gain regulatory  approval to acquire Spirit while it remained in an “anticompetitive” alliance.

JetBlue refused to abandon the partnership with American and said it believed it could secure approval for the Spirit deal and defend the American partnership. JetBlue said it would be willing to shed all of Spirit’s assets in New York and Boston to avoid increasing its presence at airports covered by the alliance. The trial, under way in Boston, is the first test of whether JetBlue’s ambitions can pass muster with antitrust enforcement authorities.

A Spirit spokesman said Thursday that Spirit remains excited about the JetBlue deal and the benefits it will bring to travelers.

The Spirit deal hasn’t been a major factor in testimony during the trial’s first three days, but Justice Department lawyers have alleged that it only compounds the potential harm from JetBlue’s tie-up with American. It “risks placing not one, but two low-cost airlines under the thumb of AA,” the Justice Department wrote in a filing ahead of the trial.

Lawyers for American and JetBlue have called the Justice Department’s characterization of the Spirit acquisition a red herring, and said it had nothing to do with the Northeast Alliance. JetBlue has said that its partnership with American and its proposed acquisition of Spirit are both part of the same effort to better challenge bigger rivals, and that acquiring Spirit is a sign that it has retained its independence from American.

Write to Alison Sider at [email protected]

“I view this as opening Pandora’s box,” he said.

JetBlue and American announced their Northeast Alliance in 2020, saying they could be a more formidable competitor against

Delta Air Lines Inc.

DAL -3.56%

and

United Airlines Holdings Inc.

UAL -2.98%

in New York and Boston by joining forces at those airports. The airlines sell seats on one another’s flights along certain routes, pool airport slots, coordinate schedules and share revenue from flights within the scope of the partnership.

The Justice Department, along with six states and the District of Columbia, filed an antitrust lawsuit a year ago, alleging that the partnership will dampen competition and cost consumers hundreds of millions of dollars in higher airfare. A trial is currently under way in federal court in Boston with Judge Leo Sorokin presiding.

American declined to comment on Mr. Kirby’s testimony, and JetBlue had no immediate comment. The two airlines have argued in court filings and testimony this week that the alliance hasn’t caused fare increases or reduction in output in the roughly 18 months that it has been in place, but has allowed them to offer more flights in the region. JetBlue Chief Executive

Robin Hayes

testified Wednesday that before the partnership, JetBlue had struggled to expand its position at LaGuardia and JFK, congested New York airports where the government controls takeoff and landing rights.

Spirit, a budget airline, has been a vocal critic of the partnership. During his testimony, Mr. Kirby read from an email he sent to Spirit executives after the alliance was unveiled, in which he wrote that the arrangement “reeks of antitrust collusion and backroom deals” for takeoff and landing slots at LaGuardia Airport and John F. Kennedy International Airport.

Last year Spirit urged the Department of Transportation to further investigate the partnership, arguing it would undermine the government’s previous efforts to boost low-fare competition in New York’s airports, leaving the vast majority of flying there in the hands of the largest carriers and their partners. Mr. Kirby testified Thursday that the divestitures JetBlue and American proposed to address antitrust concerns weren’t significant enough to give Spirit or another upstart a real foothold at JFK.

“It would take a massive amount of divestitures” to remedy the situation created by the alliance, he said Thursday.

Complicating the situation is Spirit’s planned sale to JetBlue, after the carriers struck a $3.8 billion deal in July. JetBlue’s commitment to the Northeast Alliance was a major stumbling block as negotiations between the two carriers dragged on publicly throughout the spring and summer. Before eventually agreeing to the deal, Spirit executives argued that JetBlue wouldn’t be able to gain regulatory  approval to acquire Spirit while it remained in an “anticompetitive” alliance.

JetBlue refused to abandon the partnership with American and said it believed it could secure approval for the Spirit deal and defend the American partnership. JetBlue said it would be willing to shed all of Spirit’s assets in New York and Boston to avoid increasing its presence at airports covered by the alliance. The trial, under way in Boston, is the first test of whether JetBlue’s ambitions can pass muster with antitrust enforcement authorities.

A Spirit spokesman said Thursday that Spirit remains excited about the JetBlue deal and the benefits it will bring to travelers.

The Spirit deal hasn’t been a major factor in testimony during the trial’s first three days, but Justice Department lawyers have alleged that it only compounds the potential harm from JetBlue’s tie-up with American. It “risks placing not one, but two low-cost airlines under the thumb of AA,” the Justice Department wrote in a filing ahead of the trial.

Lawyers for American and JetBlue have called the Justice Department’s characterization of the Spirit acquisition a red herring, and said it had nothing to do with the Northeast Alliance. JetBlue has said that its partnership with American and its proposed acquisition of Spirit are both part of the same effort to better challenge bigger rivals, and that acquiring Spirit is a sign that it has retained its independence from American.

Write to Alison Sider at [email protected]