JetBlue will not appeal NEA ruling, refocuses on Spirit merger

And just like that, poof, it was gone. JetBlue will not appeal a US District Court ruling that its Northeast Alliance (NEA) with American Airlines represents a violation of the Sherman Antitrust Act. In choosing to dissolve the NEA JetBlue makes a large bet that a similar outcome will not be reached in its proposed merger with Spirit Airlines, as it chooses to focus on that for growth moving forward.

JetBlue has made the difficult decision not to appeal the court’s determination that the NEA cannot continue as currently crafted, and has instead initiated the termination of the NEA, beginning a wind down process that will take place over the coming months.

– JetBlue Statement

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Unwinding a tangled web

Implementing the NEA took significant time and energy for American and JetBlue. Dissolving it will likely not be much easier. The carriers have to account for “many thousands of customers who have already booked travel in the months ahead.” The Court initially suggested a rapid timeline for terminating the cooperation. It has since softened that stance, but not enough for the airlines. JetBlue asserts the DOJ’s proposed plan remains “too onerous and overreaching.” They are seeking additional time to develop a wind down plan which protects passengers. It is expected to be heard in court in the weeks ahead.

In the interim, JetBlue notes “nothing will change immediately and [customers] can feel confident in new and existing bookings for the coming months. In addition, customers can continue to earn/redeem points and receive reciprocal loyalty benefits.”

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In a memo to employees JetBlue indicates that it “may need to cancel some routes that were previously made possible by the NEA, due to slot and gate constraints or commercial viability.” Decisions on those cuts will come at a later time.

In a somewhat unexpected and bizarre move, American Airlines intends to continue its appeal, despite JetBlue choosing to walk away. The carrier states “JetBlue’s decision and reasoning confirm our belief that the NEA has been highly pro-competitive and that an erroneous judicial decision disregarding the NEA’s consumer benefits has led to an anticompetitive outcome.”

What value it can realize from winning, however, remains unclear, unless the JetBlue/Spirit merger collapses and JetBlue then comes back should American win the appeal.

A boost for Spirit merger plans

JetBlue claims its decision to walk away from the NEA renders the DOJ’s core objections in its proposed takeover of Spirit Airlines “entirely moot.” The carrier also suggests “the DOJ should reconsider and support our plan to bring a national low-fare competitor to the Big Four; the flying public deserves better than the status quo.”

While it is unlikely the DOJ will immediately drop is suit seeking to block the merger, perhaps this gives an opening for additional negotiations to see the deal through without a judge’s ruling.