JetBlue Airways Corp. would have had to pay American Airlines Group Inc. $200 million last year under the original terms of a revenue-sharing agreement. The payment eventually was negotiated down to $20 million, according to JetBlue chief executive officer Robin Hayes.
“The way I look at it is, Covid threw up some exceptional events and the parties reached an understanding,” Hayes told the US District Court for the District of Massachusetts, in Boston.
The CEO said he didn’t recall the exact amount of the initial agreement, which the US Department of Justice said was $200 million. That figure -- more than JetBlue’s reported $182 million net loss in 2021 -- was revealed during testimony on Tuesday as part an antitrust case pitting the Justice Department against the two partnered airlines.
The federal government, along with attorneys general for six states and the District of Columbia, last year sued American and JetBlue, alleging their partnership, called the Northeast Alliance, amounts to an illegal merger. The alliance, which allows the companies to share routes, bookings and passengers in the US Northeast, includes a revenue-sharing formula that requires whichever airline grows more in a given year to make a transfer payment to the partner that grows less.
American, which had focused on international expansion, had less growth than expected in the first year of the alliance because of restrictions and sluggish business travel related to the COVID-19 pandemic, Hayes said. Because it grew less, JetBlue would have had to pay American, the country’s largest airline, a hefty fee as part of their agreement.
Still, Hayes said he was never concerned JetBlue would need to pay American the full amount and was focused on renegotiating JetBlue’s other contracts, such as one with Airbus SE to buy new planes.