No airline has been more vocal about the American and JetBlue Northeast Alliance than Spirit, and the fight has stepped up a notch again with American’s recent response in the Department of Transportation (DOT) docket surrounding the Northeast Alliance with JetBlue (NEA). There is nothing quite as fun as watching lawyers get cheeky, but it really bothers me when the arguments aren’t valid. And Spirit really doesn’t seem to have done its homework.
Spirit’s latest argument is summed up like this:
Through this deepening market consolidation, American can now raise prices, limit true competition by the subservice carriers (Alaska and JetBlue), and block new entry at New York, Boston, and Washington Reagan airports.
Spirit goes on to say that “there is not even a hint” that this was considered when DOT gave approval, and a public input process would have helped. Now Spirit is on a crusade to save the day by convincing the feds to implement a public input process, so it continues to file updates to its complaint showing all the harm that’s being done. American and JetBlue disagree.
Do I really think Spirit is in this for the good of the people? Of course not. Spirit wants to do what it can to score more slots and gates at congested airports. That’s also why Southwest has been vocal about this; it wants the same thing. The only other airline that has commented in the docket is United which seems to just want unredacted copies of the agreement, because… who doesn’t want that? Everyone is just in it for their own interests, as they should be, but DOT… hasn’t said a word since this was first filed in January other than to say it will review this in “due course.”
I’ve read through all the back and forth and you can do the same. One one side you have Spirit and friends saying this is a travesty of justice and there should have been a more thorough, public review. On the other side, you have American and JetBlue saying there was plenty of time for Spirit to comment when this was going on, and it opted not to do it until after the fact.
The docket had been quiet for a couple months when Spirit decided it would file an update to its complaint on May 11. That was followed by American’s response posted June 2 and JetBlue’s response on June 3. I’ll admit, I didn’t really look into Spirit’s filing until the responses caught my eye. It looked like Spirit had been really sloppy with this complaint. That’s when I decided to dig further.
I spoke to Bruce Wark, American’s VP and Deputy General Counsel, and I repeatedly asked Spirit for comment, even delaying the post from Tuesday to give them more time when they said they needed it. It sounds like they were too busy with all the Miami news, and ultimately they did not get me anything before this post went live, so I’m just going off what I read in the filing.
The point of Spirit’s filing appears to be a way for the airline to try to shine a spotlight on what has transpired since the NEA was put into place. The problem is, I don’t see this as evidence the way they do. Remember, in that summary above, Spirit said “…American can now raise prices, limit true competition by the subservice carriers (Alaska and JetBlue)….” So I was particularly interested in the pricing example the airline used.
Spirit says this:
In codeshare markets without a third airline American and JetBlue appear to charge identical fares. In
other markets, the strategy appears to be that JetBlue and Alaska maintain lower fares to match non-partnership competitors, while American raises its fares significantly higher for the same flight and ticket class.
The market Spirit chose to show how American priced at a premium over JetBlue when other competitors were also in the market was New York/JFK to Jacksonville. On May 11, Spirit looked at pricing on the morning flight from JFK to Jacksonville on July 6 as operated by JetBlue. It found JetBlue charging $120 while American was charging $165. According to Spirit, this is an outrage and it shows American trying to coordinate to raise fares. Presumably the idea is that JetBlue can be used in lieu of American having Basic Economy fares in a market. Then American can just jack its fares up and get a premium. But this makes no sense.
Spirit says, “Whether a passenger purchases the American flight for $165 or the JetBlue flight for $120, they will fly at the same time, on the same route, on the same plane, in the same ticket class (economy)….” But that’s not true. The JetBlue fare of $120 is in Blue Basic which is the airline’s Basic Economy. American’s $165 fare is the lowest regular coach fare and that happens to match JetBlue’s lowest regular coach fare. So these are different products being sold, and American does not have a Basic Economy fare in the market, as is the case in most domestic markets for American today.
Is this a way to raise prices and limit competition? It’s hard to see how that’s the case. American hasn’t flown JFK – Jacksonville this century, if ever. It last flew there from LaGuardia way back in mid-2017. So this is a market where American could have tried to compete on price before, but it was only offering connections to those who could have chosen between JetBlue and Delta to fly nonstop. Now, American is a third option, albeit on a codeshare, and it is choosing not to undercut the airline that is actually operating the flight, nor is it choosing to put Basic Economy there.
On the flip side, Spirit highlights Boston – Charlotte as a market where only American and JetBlue fly without other competition. When Spirit looked, the lowest fare was $194 and both airlines had the same price. The airline then suggests that “The ability to arbitrarily raise fares in this manner is cause for great concern and one of the many harms resulting….” But there’s nothing arbitrary about it.
American and JetBlue both fly this route on their own airplanes, and they do not codeshare on each other’s flights in this market. This is just two airlines competing on price as you’d expect. That’s very different than American deciding not to undercut JetBlue on a codeshare flight operated by JetBlue. It’s also not indicative of American trying to raise fares only in markets with third party competitors.
You don’t need to look very far to prove this. Take Boston – West Palm Beach, for example. That’s a market where there is no other airline flying besides JetBlue. American codeshares on it, and it prices its regular economy fare to match JetBlue’s regular economy fare while JetBlue has a lower Basic Economy fare, just as it did in the more “competitive” market of JFK – Jacksonville.
Really, it seems that American just doesn’t want to file Basic Economy fares on domestic partner codeshares and it doesn’t want to undercut those partners who are actually operating the flights. American generally doesn’t file Basic Economy fares in markets without ultra low cost competition, and even those that exist are few and far between. It would be odd to change its strategy to match JetBlue on every JetBlue-operated flight. But remember, these are routes that American doesn’t fly itself, so American is still adding value and not decreasing competition while raising fares. It seems like a strange argument to make.
The last part of that initial summary is about how the NEA blocks new entrants form getting into New York airports, Boston, and Washington/National. But how is that the case? If American and JetBlue did not have an alliance, does Spirit think they’d just walk away and let Spirit walk in and take all the slots? Of course not. American and JetBlue would continue to fly their flights the way they have before. I don’t see how the NEA specifically blocks new entrants. In fact, it opens up slots for new entrants at JFK and Washington/National by requiring admittedly minimal divestitures. Spirit wants more, and really what it probably wants is slots at LaGuardia.
Why didn’t DOT include LaGuardia slots? It’s probably because JetBlue only had 16 flights a day there pre-pandemic. While American was bigger, combined they were still more than 10 points smaller than Delta. DOT’s point in this agreement was to say, “hey, if you use your slots better and offer more seats, then we’re onboard.” That isn’t unreasonable, though it’s not what Spirit would like.
Spirit tries some tortured examples to show just how bad things are. For example, it scolds American for codesharing between JFK and Seattle when that was a market that was prohibited as part of the Alaska/Virgin America merger agreement in order to maintain the American partnership between those two airlines. American does not mince works in its reply:
Spirit also claims that American is placing its code on Alaska’s JFK-SEA service allegedly in violation of the consent decree’s prohibition on American “Market[ing] any Alaska Flight that originates or terminates at any Key American Airport” because “Key American Airport” includes JFK. Again, Spirit should have checked the facts – what Spirit misleadingly omits is that American places its code on Alaska’s JFK-SEA service only in the context of international connecting itineraries.
And yes, you won’t be surprised to hear that international connecting itineraries were not restricted by that consent decree.
It seems like Spirit might just be throwing things at the wall to see what sticks. It uses a claim that I can’t verify:
Out of the 26 overlapping American-JetBlue markets Spirit highlighted in its complaint, 17 of these markets have already lost competition due to the NEA, with more to follow.
What does that mean? There isn’t a definition in the filing, and I can’t replicate it. In the end, Spirit says “Much is still unknown about American’s Strategic Partnerships – the NEA conditions fail to address even the known concerns.”
The first part is true. This is a new kind of domestic alliance, and there is a lot of unknown. DOT was able to extract some concessions in the process, and now it’s time to see if this works. Should DOT review the results regularly and step in if it sees metrics going in the wrong direction? Heck yeah.
If this creates competition as American and JetBlue claim, then it should be allowed to continue. It hardly seems worthwhile to open up a whole long public input period just to put the NEA on hold for longer. We’re already seeing it develop, so let’s see how it plays out. DOT can always change its mind later if the numbers show American and JetBlue were lying. Otherwise, this may very well end up being a good thing, as DOT certainly hopes will be the case.