By David Shepardson
(Reuters) - Lawyers for the U.S. Justice Department said American Airlines (NASDAQ:AAL) Group's alliance with JetBlue Airways (NASDAQ:JBLU) Corp would harm travelers while the airlines pushed back during closing arguments on Friday in the government's bid to dissolve the partnership.
The department, six states and the District of Columbia have called the "Northeast alliance "a "de facto merger" of the companies' Boston and New York operations. Through the alliance, the airlines coordinate flights and pool revenue to the detriment of travelers, said the department, arguing consumers face nearly $700 million in extra annual costs.
U.S. District Judge Leo Sorokin in Boston plans to hold another hearing before he issues a decision in the case.
Justice Department lawyer Bill Jones argued the alliance gives the airlines incentives to raise prices and that they are no longer competing.
"This is a bad deal for travelers," Jones said, saying it was important because of the impact on families that travel and who want affordable tickets and good service.
Jones added the government wants to ensure as much competition as possible in the airline sector "and this deal threatens to do exactly the opposite."
Lawyers for JetBlue and American argued the alliance, which was announced in 2020, has not raised air fares or resulted in flight cuts. They say it has expanded flights and made them more competitive with Delta Air Lines (NYSE:DAL) and United Airlines on northeast routes.
Daniel Wall, a lawyer for American, rejected the government's analysis that the alliance will hike consumer prices and argued "it makes these markets more competitive than they otherwise were."
Wall said consumers or the Justice Department could file suit at a later date if the alliance was proven to be anticompetitive. "This is not a situation in which you need to destroy the consumer benefits of the (alliance) based upon the speculation the other side is giving you," Wall said.
Last month, U.S. carrier Spirit Airlines (NYSE:SAVE)' shareholders voted in favor of JetBlue's $3.8 billion takeover offer, but face an uphill struggle for regulatory approval.