WASHINGTON/NEW YORK (Reuters) - The U.S. Justice Department said on Wednesday that it dropped a lawsuit against United Continental Holdings Inc and Delta Air Lines Inc after they abandoned a deal over landing slots in the New York area, which the department had warned threatened consumers.
United scrapped its plan to lease 24 takeoff and landing slots at Newark Liberty International Airport from Delta because of a recent decision by the U.S. Federal Aviation Administration (FAA) to ease limits on the airport's usage, according to a court filing.
The Justice Department had said the deal would have raised United's share of slots at Newark to 75 percent from 73 percent, leading to higher prices and fewer choices for travelers in New York, New Jersey and parts of Pennsylvania.
"The FAA’s action opens up Newark to more robust competition and achieves the very outcome we sought in litigation: protecting consumers from United’s plan to enlarge its monopoly at Newark," Assistant Attorney General Bill Baer said in a press release.
In 2008, the FAA limited Newark to 81 takeoffs or arrivals per hour in order to stop congestion and a spillover effect from nearby John F. Kennedy International Airport (JFK). It said last week that it was lifting these controls, effective Oct. 30, because more flights from Newark were departing on time.
United took a different point of view.
In a statement on Wednesday, United said its deal with Delta was in the public interest and added, "We fear that the already strained New York air space will be further exacerbated" by the FAA's decision.
Delta said its separate deal to lease slots from United at JFK remained in place.
On Tuesday, United's legal counsel told the Justice Department that the FAA's action "prevents the parties from meeting various contractual requirements. As a result, the transaction ... is no longer viable," according to the court filing.
Aviation industry consultant Robert Mann said the slots no longer had the financial value the airlines assigned them now that slot controls would be lifted.
He added that United would have to vie for space for its flights during peak times nonetheless.
"If there really is a demand for new activity at Newark, it will far outstrip the 7 or 8 percent reduction (in operations there) that has happened since 2008," he said.
(Reporting by Timothy Ahmann in Washington and by Jeffrey Dastin in New York; Editing by Leslie Adler and Tom Brown)