American and JetBlue flights prepare to take off at Los Angeles International Airport, Jan. 11, 2023.
Carolyn Cole | Los Angeles Times | Getty Images
JetBlue Airways said Wednesday that it will end its partnership in the northeastern U.S. with American Airlines after a federal judge ordered the carriers to end the agreement, as the New York airline focuses on its acquisition of Spirit Airlines instead.
American said in June that it would challenge the ruling against the JetBlue partnership — called the Northeast Alliance, or NEA — but New York-based JetBlue said Wednesday it would not appeal the decision. That ruling was the result of a 2021 lawsuit brought by the Justice Department, six states and the District of Columbia to block the alliance, calling it anticompetitive.
“We’ve spent a lot of time considering next steps and, while we believe in the NEA’s procompetitive benefits, we have made the hard decision not to appeal the court’s ruling and have instead initiated the termination of the NEA, beginning a wind down process that will take place over the coming months,” JetBlue CEO Robin Hayes said in a staff note on Wednesday.
As a result of that wind-down, Hayes said the company will likely need fewer jobs in New York and Boston, though the airline doesn’t plan to furlough workers.
JetBlue’s deal to buy Spirit came together after JetBlue and American launched the Northeast partnership. The NEA, approved during the last days of the Trump administration, allows the two carriers to share passengers and revenue and to coordinate schedules. American and JetBlue said they needed the deal to better compete against big carriers such as United and Delta in congested airports in the New York area and in Boston.
But a federal judge ruled in May that that partnership was anticompetitive, ordering the two airlines to undo the alliance.
American Airlines said Wednesday that it will still appeal the ruling.
“JetBlue has been a great partner, and we will continue to work with them to ensure our mutual customers can travel seamlessly without disruption to their travel plans,” American said in a statement on its website.
A spokesman for the airline did not immediately say how American could salvage the deal if it wins an appeal, if JetBlue plans to begin unwinding it.
“We, of course, respect JetBlue’s decision to focus on its other antitrust and regulatory challenges.”
JetBlue said in a securities filing that it informed American on June 29 that it was terminating the partnership because of the judge’s ruling. JetBlue said the termination will take effect July 29.
JetBlue won the deal to acquire Spirit in July 2022 after a bidding war with low-cost rival Frontier Airlines. JetBlue has argued it needs Spirit in order to grow and better compete against larger airlines that dominate domestic air travel. The combined carrier would become the country’s fifth-largest.
The purchase of Spirit would give JetBlue access to more aircraft at a time when manufacturers are struggling to keep up with demand. It would also gain access to hundreds of pilots, which are also in short supply.
From the start that deal has faced a high hurdle to win approval from the Biden administration, which has vowed to challenge deals it finds harm competition.
The Justice Department sued to block the deal in March. “JetBlue’s plan would eliminate the unique competition that Spirit provides — and about half of all ultra-low-cost airline seats in the industry — and leave tens of millions of travelers to face higher fares and fewer options,” it said in the suit.
JetBlue shares fell more than 7% on Thursday, the first trading day after JetBlue said it wasn’t going to appeal the ruling. American lost more than 2% and Spirit gained 1%.
This article was originally published on CNBC