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American Air-JetBlue Venture Antitrust Inquiry Is Sharpened

U.S. Justice Department officials are concerned about anticompetitive coordination and inflated fares in the American Airlines-JetBlue partnership.
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The U.S. Justice Department has reportedly stepped up an antitrust probe of American Airlines Group  (AAL) - Get American Airlines Group Inc. Report recent partnership with JetBlue Airways  (JBLU) - Get JetBlue Airways Corporation Report due to concern about anticompetitive coordination and inflated fares, a media report says.

Antitrust 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, The Wall Street Journal reported. 

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The department is concerned that an American-JetBlue alliance could diminish competition at congested Northeast airports in New York and Boston.

The investigation is continuing and no final conclusions have been reached.

"We are fully cooperating with the Department of Justice's review," a spokeswoman for American Air, based in Fort Worth, Texas, told the Journal. "As the alliance has begun to be implemented, it is already proving its competitive and pro-consumer benefits."

Any Justice Department decision could be affected by the views of the Transportation Department, which has broad regulatory authority over the industry and signed off on the partnership in the waning days of the Trump administration.

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"Our understanding is that DOJ’s review is ongoing, but we would defer to the department to provide specifics," JetBlue said in a statement. "We believe the alliance is already providing customers many of the benefits we’ve promised, with much more to come."

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The Transportation Department is facing a public request from Spirit Airlines  (SAVE) - Get Spirit Airlines Inc. Report for a full and formal investigation of the American-JetBlue agreement, a move that could allow for reconsideration of the agency's prior views.

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 City area and Boston.

The airline industry was decimated by the coronavirus pandemic, as consumers and businesses severely limited their travel plans.

Earlier this year the airlines began implementing the partnership, under which they will also coordinate customer-loyalty programs and share certain assets, planning and revenues.

Separately, JPMorgan Chase analyst Jamie Baker double upgraded JetBlue to overweight from underweight on Wednesday with a price target of $25, up from $15. JPMorgan Chase also upgraded Spirit Airlines to overweight.

Shares of American were off 1.2% to $22.30, while JetBlue was up 0.2% to $20.82.