JetBlue Protests 'Immunized' Joint Ventures of Legacy Airlines

The same Big 3 U.S. airlines that have cried foul over unfair competition from Persian Gulf carriers face complaints about their own domineering practices. JetBlue Airways, the fifth largest U.S. airline, says it is being pinched by “immunized” joint ventures and alliances involving American, Delta and United airlines and foreign partners.

“As an airline with a growing international footprint, we’re concerned about the long-term implications that immunized joint ventures could have on our ability to grow in overseas markets one day,” said Robin Hayes, JetBlue president and CEO. “We have a stake in this debate because we face serious airport access challenges as a result of joint venture market concentration right here in our backyard.”

At the recent U.S. Chamber of Commerce Aviation Summit in Washington, D.C., Hayes said JetBlue has objected to the U.S. Department of Transportation (DOT) over an application by Delta and Aeromexico for a joint venture to conduct flights between the U.S. and Mexico. It has joined with Hawaiian Airlines to urge the agency “to think long and hard” before approving a similar venture between American Airlines and Australian carrier Qantas for trans-Pacific routes. The DOT decides whether such pairings should be granted immunity from U.S. anti-trust laws.

Hayes related that JetBlue was stymied for years from securing “commercially viable” takeoff and landing slots and airport real estate at Mexico City’s Benito Juarez International Airport, where Aeromexico and Delta have dominant positions. The three leading U.S. carriers already have unprecedented market power and access to other countries, he argued.

“The effects that joint ventures have is pretty clear, although the carriers may not want to admit that as they repeatedly tout the supposed benefits of these arrangements to competition authorities,” Hayes said. “What JVs have effectively done is given three already large, dominant U.S. airlines even greater scale and control in the world’s most lucrative international markets.” In the North Atlantic region, “three mega alliances are controlling 87 percent of this market, and on routes where JVs dominate consumers have little choice in the way of meaningful competition and face higher fares as a result.”

He added: “Smaller airlines like JetBlue and other great airlines like Alaska Airlines, Hawaiian and Virgin America serve a very important role in keeping our legacy competitors in check by keeping fares down and service standards up and driving the type of competitive dynamic that is beneficial to customers. In fact, our small segment of only 20 percent market share between the smaller airlines is more important than ever to the traveling public.”

Once the DOT grants anti-trust immunity to a joint venture, it does not revisit whether the carriers are delivering the consumer benefits they promised, Hayes said. JetBlue is asking both the DOT and the U.S. Congress to conduct reviews of immunized joint ventures every three-to-five years to ensure the promises are kept.

“All we’re asking is that governments hold airlines to the promises they make when they apply for anti-trust immunity,” Hayes said. “This happens in other parts of the world perfectly successfully—for example, in markets like Australia—and airlines have found a way to operate under this regime.”

Supporting JetBlue’s position during the daylong summit was Virgin America CEO David Cush. “What we talk about a lot on Capitol Hill and other places is we need to make sure the small airlines can get into the airports,” Cush said during a panel discussion. “They need to change the rules that were effective rules when there were eight or 10 carriers that had slots that you could trade with instead of four carriers that now have essentially gone in and carved up the marketplace.”

A contrasting view was offered by ANA president and CEO Shinya Katanozaka, who spoke favorably of airline joint ventures, including a 2011 agreement the Japanese carrier entered into with United Airlines in 2011. “Thanks to increased convenience, passengers connecting on flights between ANA and our JV partners have more than doubled in the past five years,” Katanozaka related.