During an antitrust trial over its Northeast Alliance partnership with JetBlue, American Airlines has argued that the only way it can compete in New York is by teaming up with the smaller airline. The problem, American says, is that it’s impossible to get access to new “slots” that allow it to schedule more departures and arrivals from the capacity-controlled New York airports.
While that’s true for all airlines, American is in the unique position of having given away slots it previously held in the early 2010s as part of its merger with US Airways.
But it turns out that American still had more slots to use, and could have had a moderately 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 in U.S. District Court in Boston on Friday, after an audit found that American was underutilizing the coveted use-it-or-lose-it spots.
The reason for the underutilization, Raja said, was that in the aftermath of the merger with US Airways, the slots were simply forgotten about.
“Accounting and combining slots after the merger was a manual process,” Raja, who used to primarily manage the airline’s network, said. “There’s no good reason, and I’m a little beside myself that it happened.”
“It was for the worst of reasons,” he conceded. “It makes us sound completely ridiculous.”
Discussion of the slots came during a discussion about American’s pre-pandemic — and pre-Northeast Alliance — plans to expand and reshape its service at Boston Logan International Airport and John F. Kennedy International Airport, two of the airports covered by the Northeast Alliance (the others are LaGuardia Airport and Newark Liberty International Airport).
In a Feb. 5, 2019, email response to Brent Alex, a regulatory affairs director at American Airlines, Raja confirmed that they had agreed to surrender the slots to the FAA because they weren’t being fully used.
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“Don’t cast this as we ‘lost’ slots,” Raja wrote. “We didn’t use all of our slots for years to the point that no one knew our true baseline.”
In the email shown in court, Raja wrote that the airline thought it had 216 slots after losing the seven, while the FAA thought that it had 200. In the end, the two agreed to allow American to hold onto 210 slots.
The “slot” system governs takeoffs and landings at the world’s busiest airports as a mechanism to regulate traffic flow and avoid both dangerous overcrowding and anti-competitive actions — think “hoarding” — by some airlines. In the U.S., three airports — JFK, LaGuardia and Ronald Reagan Washington National Airport in Washington, D.C., are slot controlled, while a fourth — Newark — is considered “schedule controlled” instead, which is a similar system with several differences.
Unless an airport builds a new runway or otherwise finds a way to increase capacity — further optimizing air traffic control patterns, for instance — the number of slots is finite, and all slots are governed by the FAA. Each slot represents one takeoff or landing — a “slot pair” would signify one of each, or a round-trip flight.
American has said that it needs the alliance with JetBlue in order to compete in the New York market, which is primarily dominated by Delta and United. JetBlue was the largest airline at JFK in the 12-month period ending in July 2022, according to the Port Authority of New York and New Jersey, but has limited ability to grow due to a significantly smaller route network than the legacy airlines.
By combining JetBlue’s slots at JFK (and American’s at LaGuardia) with American’s broader network, the two airlines have argued that they can be formidable competitors against the Delta-United entrenchment.
While the alliance was cleared in the waning days of the Trump administration, the Department of Justice sued in 2021, alleging that by codesharing and collaborating to run complementary route networks through New York and Boston, the alliance between the two would “eliminate significant competition between American and JetBlue that has led to lower fares and higher quality service for consumers traveling to and from those airports.”
Partner growth: American adds 6 new routes as part of Northeast Alliance tie-up with JetBlue
The airlines, however, say that in the 18 months since the alliance was approved, fares have not increased and consumers have had access to better choices.
The alliance creates one single, stronger and “relevant competitor out of two weak ones,” Richard Schwed, a lawyer from Shearman & Sterling representing JetBlue, argued in his opening, citing 50 new nonstop routes that have been added to or from New York or Boston since the alliance was formed, 90 nonstop routes with increased capacity, 17 new international routes covered by the alliance, and a more than 17% increase in total capacity on the routes covered by the alliance.
The trial began in U.S. District Court in Boston on Tuesday and is expected to run for 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 network planners for the airlines and former executive Scott Laurence, who architected the alliance on the JetBlue side, are also expected to testify. A decision from U.S. District Judge Leo Sorokin could take weeks or months.
TPG is reporting from the U.S. District Court in Boston, so stay tuned for the latest on the trial.