Courts Ground JetBlue, American Airlines Alliance
Market News

Courts Ground JetBlue, American Airlines Alliance

Those hoping the JetBlue (NASDAQ:JBLU) and American Airlines (NASDAQ:AAL) alliance would signal a new era in airline stocks will go into the weekend with their hopes crushed. The Justice Department stepped in and filed suit to block the move, and the courts agreed, quashing the alliance before it could even get started. JetBlue closed down 1.8% in Friday’s trading, while American fared slightly better, closing down 1.53%.

The alliance called for the duo to handle flights in one specific region: the northeast United States. That covers quite a bit of ground and a lot of people, especially given that it includes both New York and Boston. Such a move, according to U.S. District Judge Leo Sorokin, would “…substantially diminish competition in the domestic market for air travel.” Sorokin also noted that this would happen specifically by combining the Boston and New York markets into one service. JetBlue and American Airlines, Sorokin noted, are two of the “…most significant competitors in that region.”

Given that both airlines have already sold tickets under this new arrangement through the summer travel season—one of the biggest travel periods in a year—trying to untangle this partnership within the 30 days allowed by Judge Sorokin will undoubtedly be difficult. A recent report from the U.S. PIRG Education Fund won’t help; the report detailed that JetBlue had the record for the biggest number of customer complaints in the last 25 years. This latest development likely won’t improve that figure.

Overall, Wall Street appears to favor AAL stock over JBLU stock. Indeed, JetBlue is considered a Moderate Sell by analysts, and with an average price target of $8.05, offers investors 13.54% upside potential. Meanwhile, American is considered a Hold, and its average price target of $18.09 gives it 22.06% upside potential.

Disclosure

Related Articles
TheFlyAmerican Airlines price target raised to $12 from $11 at Susquehanna
TheFlyJefferies aerospace & defense analysts hold analyst/industry conference call
TheFlyEarly notable gainers among liquid option names on October 4th
Go Ad-Free with Our App