DOJ Challenges JetBlue-American Airlines Alliance
Last year, American Airlines (NASDAQ: AAL) and JetBlue Airways (NASDAQ: JBLU) announced a unique agreement to cooperate in the New York and Boston markets in order to compete more effectively with key rivals Delta Air Lines (NYSE: DAL) and United Airlines.
The U.S. Department of Transportation approved the arrangement (with certain conditions) in January. As a result, American and JetBlue have begun to implement their new partnership this year. However, on Tuesday, the U.S. Department of Justice and several states sued American Airlines and JetBlue on antitrust grounds. Let's see what this development means for both airlines.
Today, Delta Air Lines and United Airlines dominate the New York market. While JetBlue has a base at JFK International Airport and American has small hubs at JFK and LaGuardia Airports, neither airline has nearly as many slots as Delta or United. That makes it difficult to compete. For example, American Airlines can't offer enough connecting flight options to offer a wide slate of international flights from New York. Meanwhile, significant holes in JetBlue's route network make it hard for the carrier to compete for corporate contracts.
Source Fool.com
