The federal government should take control of the slot allocation at all New York area airports and put a few un-bribable people in charge of making decisions.
The U.S. sued United Continental Holdings Inc., seeking to block its acquisition of takeoff-and-landing rights from Delta Air Lines Inc. at New Jersey’s Newark Liberty International Airport, saying the deal threatens to raise prices for passengers.
United’s acquisition of the 24 slots would increase the carrier’s already dominant position at the airport and hurt the ability of other airlines to compete there, the Justice Department’s antitrust division said in a statement Tuesday.
“Allowing United to acquire even more slots at Newark would fortify United’s monoply position,” said Bill Baer, head of the Justice Department’s antitrust division, on a conference call with reporters. “That would leave the 35 million air passengers who fly in and out of Newark every year holding the bag.”
The action opens a new front by the Justice Department in its tug of war with U.S. airlines. The antitrust division began a inquiry earlier this year into whether the major carriers colluded to prop up fares. Tuesday’s complaint, which also names Delta as a defendant, accuses United of unlawfully trying to maintain a monopoly. The suit also alleges both carriers violated antitrust laws by entering into an agreement that restrains trade.
United rose 0.18 percent to $60.26 at 12:42 p.m. in New York, after sliding to the lowest price of the day on news of the lawsuit. Delta fell 0.26 percent to $50.50.
United had agreed to lease the Newark slots from Delta in a $14 million transaction, according to the complaint. Delta also has an agreement to lease slots at New York’s John F. Kennedy International Airport from United. That agreement isn’t subject to the lawsuit. Newark, JFK and LaGuardia airports are subject to federal controls on takeoff and landing slots.
“We firmly believe this transaction benefits our customers and the region by enabling us to enhance service at our Newark hub and manage congestion at the airport, ” said Rahsaan Johnson, a United spokesman. “We will vigorously defend our ability to operate effectively, efficiently and competitively at Newark.”
Delta spokesman Trebor Banstetter said the lawsuit didn’t affect its agreement to lease slots from United at JFK.
United’s hub at Newark Liberty International is a gateway for overseas flights for the world’s second-biggest carrier. United had 48 percent of passengers in the 12 months ended in July, not counting flights made by regional partners such as SkyWest Inc.’s ExpressJet, according to data compiled by the U.S. Bureau of Transportation Statistics.
In June, United said it was dropping service at New York’s Kennedy airport — where JetBlue Airways Corp. and Delta are the leading tenants — to consolidate operations at Newark.
The new lawsuit won’t affect United’s recent decision to pull out of Kennedy airport and transfer the premium service it had based there to Newark, United spokesman Johnson said.
That premium service offered customers international-level food and amenities on routes across the U.S., competing with similar offerings from Delta and American Airlines Group Inc. To facilitate the change, United moved some Boeing 757s that had been used on European routes back to the U.S. Those changes have already been implemented and won’t be hindered by the lawsuit, Johnson said. He couldn’t comment about any future effects of the Justice Department suit.
Baer said on the conference call that the Delta transaction is United’s third attempt in the last year and a half to restrict competition by buying slots at Newark. In July 2014, the carrier tried to reacquire from Southwest Airlines Co. the 36 slots that it gave up when it merged with Continental Airlines Inc. In March, 2015, it tried to acquire 18 slots from American Airlines Group Inc. Those deals were abandoned after the government expressed concerns, Baer said.
The Justice Department’s suit comes a week after five smaller airlines complained to the Department of Transportation and Federal Aviation Administration about a lack of access to New York-area airports. The Justice Department cited the letter from the five carriers in its new lawsuit.
In the letter, Alaska Air Group Inc., Virgin America Inc., Allegiant Travel Co., Spirit Airlines Inc. and Frontier Airlines Inc. urge the federal government to change the way it allocates slots at Newark, JFK and LaGuardia.
“In short, large incumbent carriers consciously seek to maintain their vise grip on hundreds of slots while new entrants with specific plans to introduce new service at these airports struggle to obtain (through allocation or purchase) even one or two slot pairs,” the airlines wrote.
The case is U.S. v. United Continental Holdings Inc., United District Court for the District of New Jersey.
This article was written by David McLaughlin and Michael Sasso from Bloomberg and was legally licensed through the NewsCred publisher network.
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Photo credit: A United Airlines plane, top left, takes off from Newark Liberty International Airport, in Newark, N.J. Julio Cortez / Associated Press