Fresh partnership talks between American Airlines and JetBlue have collapsed, with the companies now heading for the courts.
American filed a lawsuit against JetBlue on Monday with a business court in Texas. The carrier said it is seeking over $1 million in damages for the loss of the Northeast Alliance, according to a court filing.
In the lawsuit, American argues that JetBlue had refused to pay its final invoice per a revenue sharing agreement between the two companies. American said in the filing that those payments were due in January 2024.
In May 2023, a federal district court judge struck down the deal on the grounds that it was anticompetitive. The NEA saw the carriers work together to better compete against United Airlines and Delta Air Lines in the all-important New York and Boston markets.
American had sought to overturn the district court’s decision, bringing the case all the way up to the Supreme Court. However, JetBlue had not joined American in these efforts.
On Monday evening, American took the unusual step of sharing in full a letter from its chief strategy officer, Steve Johnson.
In the message sent to staff on Monday, Johnson confirmed that legal proceedings against JetBlue are underway: “One final note, in case you see it in the news. We filed a lawsuit against JetBlue today to recover money owed to American following the unwinding of the Northeast Alliance,” Johnson’s letter said.
“We understandably tabled this claim while we were in discussions with JetBlue, but now that those conversations have concluded, we need to address the accounting and reconciliation following the termination of the NEA,” the letter continued.
What Else Did American Say?
Johnson’s letter offers valuable new insight into American’s interest in a JetBlue partnership: “Although we proposed a very attractive proposition to JetBlue and its customers and team, it became clear over time that JetBlue was focused on different business priorities.”
Johnson said the businesses were “unable to agree on a construct that preserved the benefits of the partnership we envisioned, made sense operationally or financially, or was consistent with the travel rewards and co-branded card business objectives that are so important to our strategy and our customers.”
He added that despite the collapse in talks with JetBlue, American remains “intently focused on and are competing aggressively in New York and Boston.”
In an emailed statement provided to Reuters, a JetBlue spokesperson said: “We plan to review American’s complaint, and as this is pending litigation, we cannot comment further at this time.”
JetBlue Seeking New Partnership
It is a matter of public record that JetBlue has been in discussion with other airlines, however, the companies involved were unknown.
United said in a filing in January that it was not in talks with any airline about a merger or a partnership, which was an attempt to shut down rumors that the Chicago-based carrier was interested in merging with JetBlue or purchasing some of its assets.
Speaking at the Barclays Industrials Conference in February, JetBlue president Marty St. George said the carrier was in talks with “multiple airlines” about a partnership. “We have said we’re talking to multiple airlines… We’re still talking.”
He added that the carrier’s corporate turnaround strategy, known as “JetForward,” had allocated funding for a partnership.
St. George’s comments echoed those made by CEO Joanna Geraghty during JetBlue’s January earnings call. She said the airline was “having conversations with a number of carriers right now to discuss the potential for future partnership.”
What’s the Short History of the NEA?
The first Trump administration approved the Northeast Alliance. In September 2021, the U.S. Department of Justice, then under the Biden administration, sued to block it.
In 2023, U.S. District Court Judge Sorokin said the partnership “substantially diminishes competition in the domestic market for air travel,” and ruled that the two airlines must unravel the deal.
Sorokin said it harmed consumers by effectively removing one competitor from the market. In short, Sorokin wrote: “Through the NEA, American and JetBlue cease to compete and, instead, operate as a single carrier in the northeast. That is the core of the relationship, and it is a naked assault on competition.”
Jay Shabat, Airline Weekly senior analyst, said the latest development reflected a wider change in the commercial landscape for U.S. airlines: “American and JetBlue seem perfectly positioned to help each other. Both are distressed companies with network needs the other can help fulfill — in American’s case helping JetBlue with overseas coverage, and in JetBlue’s case helping American amplify its strength in northeastern markets like New York and Boston.
“It’s no surprise they previously forged a Northeastern Alliance. The world, however, has changed since the alliance was deemed illegal on antitrust grounds two years ago, and the two sides were unable to reach an updated arrangement that both sides could accept.”
JetBlue is due to report its Q1 results later on Tuesday.
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