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American Air, JetBlue Shares Fall; DOJ Is Said Set to Challenge Alliance

Shares of American Air and JetBlue fell after a report said the Justice Department will sue to block the two carriers' alliance.

Shares of American Airlines  (AAL) - Get American Airlines Group, Inc. Report and JetBlue Airways  (JBLU) - Get JetBlue Airways Corporation Report dropped on Tuesday as a media report said the Justice Department was preparing a lawsuit to challenge the carriers' alliance.

The Wall Street Journal reported that the agency's antitrust authorities are concerned that the link would reduce competition and inflate fares.

At last check shares of American Airlines, Fort Worth, Texas, fell 1.5% to $20.02 while JetBlue, Long Island City, N.Y., traded 3.6% lower at $13.95.

The lawsuit could be filed as early as Tuesday, the Journal reported citing people familiar with the development.

Officials at the Department of Justice had stepped up their antitrust probe on the partnership between American Airlines and JetBlue in April and no final conclusions have been reached, the Journal reported.

Officials had reservations about the deal before the recent change in presidential administrations, but their scrutiny of the alliance has increased since the start of the Biden administration.

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The two airlines announced a partnership last year that would permit them to sell seats on each other's planes, boosting their presence in the New York area and Boston.

American and JetBlue unveiled the Northeast Alliance in July 2020, saying it would allow them to better compete against Delta Air Lines  (DAL) - Get Delta Air Lines, Inc. Report and United Air  (UAL) - Get United Airlines Holdings, Inc. Report by sharing codes on some routes and offering reciprocal frequent flyer benefits.

The deal was approved by the Transportation Department six months later, shortly before the Trump administration finished its term.

On Friday, Sen. Richard Blumenthal (D-Connecticut) wrote to the Department of Transportation, saying the partnership amounted to anti-competitive coordination between the two carriers.

In a statement cited by Reuters, JetBlue said the partnership enabled the two airlines to give Delta and United real competition.

JetBlue said its access to American's slots would mean that it could "bring the JetBlue effect of lowering fares and stimulating demand to more routes in and out of the Northeast."