Biden Flies Blind on Antitrust
The Biden Justice Department last week filed its first major antitrust lawsuit, which seeks to dissolve
alliance in the Northeast with
Perhaps the antitrust cops, like President
only ride Amtrak because they don’t seem to care that the partnership increases competition and helps consumers.
Mr. Biden took aim at airline consolidation in his antitrust executive order this summer. But airlines have never been hugely profitable, and consolidation has provided economies of scale and cut costs. Competition from upstart JetBlue has spurred the big three legacy carriers—United, American and Delta—to reduce fares. Ticket prices on average fell by an inflation adjusted 26% between 1999 and 2019.
But there has been less competition in the Northeast, where airports are congested. Delta and United have a de facto duopoly in New York City. As of September 2019, American ran nonstop flights from New York to 54 markets and JetBlue operated 61, versus Delta’s 107 and United’s 125. JetBlue wants to expand in New York but can’t because takeoff and landing slots are limited. American wants to become more competitive with Delta and United on trans-Atlantic flights from Boston and New York but is similarly constrained.
That’s why JetBlue and American last year agreed to coordinate flights and share passenger revenue at Logan International in Boston and New York City’s three airports. The partnership allows the airlines to take advantage of economic efficiencies without merging.
The Trump Transportation Department blessed the alliance in January after the carriers agreed to give up seven landing slots at New York City airports and six at Reagan National in Washington, though the latter isn’t covered by their agreement. The airlines also promised to increase their total supply of seats in part by flying bigger planes more frequently.
“I am glad to see JetBlue and American Airlines collaborating on innovative solutions to save thousands more jobs in a way that also expands New Yorkers’ travel options,” Senate Majority Leader
declared in January. Some of his Senate colleagues were less happy and called on the Biden Administration to break up the partnership.
Enter Justice, which calls the alliance a “modern-day version of a nineteenth-century business trust.” Its lawsuit cites no evidence of consumer harm but warns that American will “co-opt” JetBlue. That’s ridiculous.
The two airlines still compete head-to-head in markets outside the Northeast, and JetBlue wouldn’t team up with American if it thought it would be “co-opted.” As Justice notes, JetBlue has a history of driving down prices in markets it enters. The low-cost carrier plans to add some 160 departures from New York and Boston airports, which should push Delta and United to reduce fares and improve service. Recall how broadband competition and investment increased after
merged with Sprint to form a third and stronger competitor to Verizon and
The DOJ lawsuit is likely to fail under the prevailing consumer benefit standard. But other businesses are now on notice that antitrust will be wielded as a regulatory weapon no matter the evidence.
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