The NEA is dead! Long live the NEA!
Despite JetBlue’s announcement yesterday that it had “initiated the termination” of the NEA between it and American — deciding not to appeal the judge’s ruling that blocked the cooperation — the door is not completely closed on this partnership. There’s a lot to unpack here, but in short, JetBlue is playing the political game, and American is doing the dirty work. It could all come back around again in the future.
In JetBlue’s announcement, it said it would walk away from American so that it could “turn even more focus to our proposed combination with Spirit.” By turning away from American, it points out that this is entirely a political game.
As it relates to the Spirit combination, terminating the NEA renders the U.S. Department of Justice’s (DOJ) concerns about our partnership with a legacy carrier entirely moot.
DOJ hates the JetBlue/Spirit merger. JetBlue has made it clear it values buying Spirit more than it does partnering with American. So, if it can divorce itself from the big, bad legacy carrier, then DOJ should jump on the bandwagon, drop the lawsuit, and back the Spirit deal.
That’s not likely going to happen, but there is a possibility that I sketch out below. The more likely scenario though is that the lawsuit still goes to court in the fall as scheduled. It’s hard to see how eliminating a low-fare competitor like Spirit is just going to sail through. But this does remove one hurdle, and it gives less ammunition for DOJ to use in court.
This is the right thing to do if it helps the Spirit deal even a tiny bit. Why? Because JetBlue’s appeal decision was completely irrelevant to the long-term survival of the NEA.
In a separate statement, American announced it will continue to pursue an appeal of the court’s decision striking down the NEA. As I understand it, whether American appeals alone or JetBlue joins the fight makes no difference. This is about the interpretation of the law. Unlike JetBlue, American has no political position at stake here, so it might as well plow forward on its own. And at the very least, American wants to win an appeal so it can get it in the record that this kind of arrangement is legal. But I think there’s more to it than just that.
What happens in an appeal? Well, the chances of getting an emergency stay that blocks the implementation of Judge Sorokin’s ruling against the NEA is slim at best. If you assume that won’t happen — which as I understand it, everyone is assuming — then the NEA has to be unwound based on the terms of the final ruling regardless of what happens with an appeal.
On the off chance that there’s an accepted motion to expedite, the appeal could take around half a year. More likely is that there is no expediting and this takes over a year to make its way through the process. Only if American wins the appeal would American and JetBlue be able to reinstate the already-dismantled NEA.
If you’re JetBlue in this case, why would you ever join that appeal? JetBlue is pushing full speed ahead on the Spirit acquisition. That case will be heard this fall, assuming that all proceeds as currently scheduled. Let’s say that there’s either a settlement with DOJ or it goes to court and JetBlue wins. Then, JetBlue merges with Spirit. Meanwhile, the NEA appeal is still making its way through the courts.
If American wins that appeal, then JetBlue can think about reimplementing the NEA again. Sure, the situation will be different with Spirit having been acquired, but the point is this: JetBlue loses nothing by walking away now. It just defers the NEA decision until after it gets its highest priority done.
If I’m DOJ, I have to see this coming. For that reason, I do wonder if DOJ might pitch a settlement that allows JetBlue to acquire Spirit if it also agrees to never re-implement the NEA, or something along those lines. I suppose it would all depend on how strongly DOJ feels about its position… and how strongly JetBlue feels about its position.
Regardless of how this all plays out, the NEA is dead for now. Everyone except for the judge seems committed to an orderly wind-down. Revenue-sharing and network coordination will end. Everything else, however, remains to be seen. I have so many questions.
- Will American and JetBlue enter into a separate slot-lease agreement in New York?
- Will American dismantle its JFK long-haul hub?
- If not, will American work on some kind of feed agreement with JetBlue to fill those long-haul flights as it has with Alaska in Seattle?
I could go on, but I know I’m not getting answers right now anyway, so there’s no point. One thing I do know is that the NEA may look dead on the surface, but it’s not truly dead as long as American continues to pursue this appeal. What happens in between is all up in the air.