During an antitrust case over the Northeast Alliance’s partnership with JetBlue, American Airlines has argued that the only way it can compete in New York is to merge with the smaller airline. The problem, American says, is that it’s impossible to gain access to new “slots” that allow more departures and arrivals to be scheduled from New York’s capacity-controlled airports.
While this is true of all airlines, American is in the unique position of giving away slots as part of its merger with US Airways in the early 2010s.
But it turns out that American still had more slots and could have had a slightly stronger presence in New York – if only it hadn’t forgotten about them.
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In 2019, the Federal Aviation Administration reclaimed seven slots from American Airlines, Chief Commercial Officer Vasu Raja confirmed Friday in U.S. District Court in Boston after an audit found American had the coveted “use-it-or-lose-it “-Spots underused.
According to Raja, the reason for the underutilization is that the slots were simply forgotten after the merger with US Airways.
“Accounting and combining slots after the merger was a manual process,” said Raja, who used to mainly manage the airline’s network. “There’s no good reason and I’m a little upset that it happened.”
“It was for the worst of reasons,” he admitted. “It makes us sound completely ridiculous.”
The discussion about the slots came amid a discussion about Americans’ plans before the pandemic – and before the Northeast Alliance – their service at Boston Logan International Airport and John F. Kennedy International Airport, two of the airports covered by the Northeast Alliance , to expand and remodel (the others being LaGuardia Airport and Newark Liberty International Airport).
In a February 5, 2019 email reply to Brent Alex, a director of regulatory affairs at American Airlines, Raja confirmed that they had agreed to relinquish the slots to the FAA because they were underutilized.
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“Don’t throw that as we ‘lost’ slots,” Raja wrote. “We didn’t use all of our slots for years until no one knew our true baseline.”
In the email presented in court, Raja wrote that the airline thought it had 216 slots after losing the seven, while the FAA thought it had 200. In the end, the two agreed to allow American to have 210 to keep slots.
The “slot” system regulates take-offs and landings at the world’s busiest airports as a mechanism to regulate the flow of traffic and avoid both dangerous overcrowding and anti-competitive actions – think “hoarding” – by some airlines. In the US, three airports – JFK, LaGuardia and Ronald Reagan Washington National Airport in Washington, DC – are slot controlled, while a fourth – Newark – is instead considered “schedule controlled”, which is a similar system with some differences.
Unless an airport builds a new runway or otherwise finds a way to increase capacity—for example, by further optimizing air traffic control patterns—the number of slots is limited, and all slots are regulated by the FAA. Each slot represents a takeoff or a landing – a “slot pair” would mean one or one return flight respectively.
American has said it needs the alliance with JetBlue to compete in the New York market, which is mostly dominated by Delta and United. JetBlue was the largest airline at JFK Airport for the 12-month period ended July 2022, according to the Port Authority of New York and New Jersey, but has limited growth opportunities due to a significantly smaller route network than legacy airlines.
By combining JetBlue’s slots at JFK (and Americans at LaGuardia) with American’s broader network, the two airlines have argued they can be formidable contenders against Delta-United’s entrenchment.
While the alliance was being sorted out in the waning days of the Trump administration, the Justice Department sued in 2021, claiming that the alliance between the two, through code-sharing and working together to operate complementary route networks through New York and Boston, would “eliminate significant competition between American.” and JetBlue, which has resulted in lower fares and higher quality service for consumers traveling to and from those airports.”
Partner Growth: American is adding 6 new routes as part of the Northeast Alliance’s connection with JetBlue
But the airlines say fares have not increased in the 18 months since the alliance was approved and consumers have had access to better choices.
The alliance creates a single, stronger and “relevant competitor from two weak ones,” argued Richard Schwed, an attorney for Shearman & Sterling representing JetBlue, in his opening statement, citing 50 new non-stop routes serving to or from New York or added Boston since the inception of the alliance, 90 non-stop routes with increased capacity, 17 new international routes covered by the alliance, and a more than 17% increase in overall capacity on routes covered by the alliance.
The trial began Tuesday in the US District Court in Boston and is expected to last up to three weeks. JetBlue CEO Robin Hayes testified earlier in the week, and testimony is expected from American Airlines CEO Robert Isom and former CEO Doug Parker. Other stakeholders, including airline network planners and former CEO Scott Laurence, who designed the alliance on JetBlue’s side, are also expected to testify. A decision by US District Judge Leo Sorokin could take weeks or months.
TPG is reporting from the US District Court in Boston, so stay tuned for the latest on the trial.