US sues over proposed deal between United, Delta at Newark

AP News
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Posted: Nov 10, 2015 2:20 PM
US sues over proposed deal between United, Delta at Newark

WASHINGTON (AP) — The federal government wants to block a deal that would increase United Airlines' grip over Newark Liberty International Airport, saying that it would drive up fares.

Newark serves 35 million passengers a year, and its airfares are already among the highest in the nation.

The Justice Department on Tuesday sued to block a deal that would let United acquire 24 takeoff and landing slots at Newark from Delta Air Lines. Federal officials said the agreement would give United — already the dominant airline at the airport near Lower Manhattan — an even greater competitive advantage that would lead to higher fares and fewer choices for passengers.

"We know from experience what happens when competition is allowed to flourish. This transaction will have the opposite effect. That is why we are seeking this injunction," Assistant Attorney General Bill Baer, the head of the Justice Department's antitrust division, said in a conference call with reporters.

Newark had the highest average fares of all major U.S. airports at the start of 2015, according to the Bureau of Transportation Statistics.

United said that with three major airports, the New York City area is the most competitive air market in the country.

"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 United spokesman Rahsaan Johnson.

The government filed the lawsuit in federal court in Newark, New Jersey. The Justice Department charges that United already controls roughly 73 percent — 902 out of 1,233 — of the slots allocated by the Federal Aviation Administration, or over 10 times more than its closest competitor.

The lawsuit was filed, Baer said, "because we determined that allowing United to acquire even more slots at Newark would fortify United's monopoly position and weaken the ability of other airlines to compete."

United traded its remaining slots at New York's John F. Kennedy International Airport to Delta while gaining Delta's slots at Newark. United expected the deal to clear regulatory approval and already moved its JFK flights to Newark. Its last JFK flight was on Oct. 25.

The Justice Department alleges that United is "sitting on many of its flights" and intentionally limiting its service at the airport. It operates only 386 daily roundtrip flights at Newark even though its slots would allow it to operate 451.

Delta issued a written statement saying that the lawsuit over the Newark slots would not affect its agreement to lease United's JFK slots. Delta began using those slots for expanded JFK service on Nov. 1.

Smaller low-cost airlines have been pushing for more access to the three main New York City-area airports — JFK, Newark and LaGuardia. Frontier, Spirit, Alaska, Virgin America and Allegiant wrote last week to Transportation Secretary Anthony Foxx to complain that United, Delta and American are blocking competition by controlling the vast majority of slots at those airports. They said domination by the big-three airlines has made travel to New York prohibitively expensive.

The smaller carriers said they control less than 2 percent of the slots at the big New York airports while the three biggest airlines control 91 percent of slots operated by U.S. carriers at Newark, 88 percent at LaGuardia, and 63 percent at JFK.

Slots are takeoff and landing rights. The government regulates slots as a way to limit and manage the capacity of the popular New York airports.

In recent years, slots have rarely changed hands except when the government has required big airlines to give up some of their slots as a condition of approving mergers.

In afternoon trading, shares of United Continental Holdings Inc. rose 10 cents to $60.25 while shares of Delta Air Lines Inc. fell 31 cents to $50.32.

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Koenig reported from Dallas. AP Airlines Writer Scott Mayerowitz in New York contributed to this report.