U.S. sues over proposed deal between United, Delta at Newark

November 10, 2015 Associated Press
A United Airlines plane, top left, takes off from Newark Liberty International Airport. The Justice Department sued Tuesday to block a deal that would have allowed United Airlines to acquire 24 takeoff and landing slots at Newark. AP Photo/Julio Cortez

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 drive up fares.

“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 announcing the lawsuit.

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, N.J. The Justice Department charges that United already controls roughly 73 percent of the slots allocated by the Federal Aviation Administration, or over 10 times more than its closest competitor.

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.

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 8 cents to $60.23 while shares of Delta Air Lines Inc. fell 18 cents to $50.45.

 

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