Calling airfares at Newark Liberty among the highest in the country, the U.S. Justice Department Tuesday sought to block the proposed $14 million sale of additional landing and takeoff slots to United Airlines, the airport's dominant air carrier.
NEWARK--The U.S. Justice Department went to court Tuesday in an effort to kill a proposed deal that would allow United Airlines--already the largest air carrier at Newark Liberty International Airport--from buying up takeoff and landing slots it does not need.
In a civil antitrust lawsuit filed in federal court in Newark on Tuesday, the Justice Department said the proposed $14 million sale of additional landing and takeoff slots from Delta Airlines to United would "strengthen a barrier that diminishes the ability of other airlines to challenge United" at the airport.
"Airfares at Newark are among the highest in the country while United's service at Newark ranks among the worst," said Assistant Attorney General Bill Baer of the Justice Department's Antitrust Division. Allowing United to acquire even more slots at Newark would only fortify United's monopoly position, he charged, weakening rivals' ability to challenge that dominance, while leaving consumers to pay the price.
"A slot is essentially a license to compete at Newark," said Baer. "United already holds most of them, and as a result, competition at Newark is in critically short supply."
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A spokesman for United said with three major airports, the New York/Newark area is the most competitive air transportation 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 Rahsaan Johnson. "We will vigorously defend our ability to operate effectively, efficiently and competitively at Newark."
A spokesman for Delta--which was also named in the lawsuit--said the airline's agreement to lease slots at Newark to United is an independent transaction and does not affect a separate agreement by Delta to lease slots from United at New York's Kennedy International Airport. Delta began flights with those slots on Nov. 1 and continues to operate that expanded JFK service, said Trebor Banstetter.
A federal criminal probe
The antitrust complaint comes with United already the focus of federal prosecutors over its dealings with the Port Authority of New York and New Jersey, which controls Newark Liberty.
Federal prosecutors are looking into whether former United CEO Jeff Smisek agreed to the scheduling a money-losing direct flight from Newark to South Carolina for the benefit of David Samson, the former chairman of the Port Authority. The twice-a-week flight from New Jersey, which would have made it easier for Samson to get to his summer home in Aiken, S.C., was put into service while United was negotiating with the Port Authority on an expansion of service to Atlantic City and a $1.5 billion extension of the PATH train to Newark Airport. The flights ended after Samson resigned.
The U.S. Attorney's office has subpoenaed records from the Port Authority and United, but an internal investigation by the airline itself led to the resignation in September of Smisek and two other high-level executives who met with Samson.
The landing slots deal with Delta came after United in June announced it was moving out of Kennedy F. Kennedy International Airport to shift all of its transcontinental flights to Los Angeles and San Francisco to its hub in Newark. That shift led Delta to take over United's slots at Kennedy, with United moving to acquire the Delta's slots at Newark
United is the largest airline by far operating at Newark Liberty and is only getting bigger. Last year, United carried nearly 25 million passengers in and out of Newark. About seven out of 10 planes landing or taking off from Newark is now a United flight.
Every major airport has a limited number of takeoff and landing authorizations, known as slots, allocated by the FAA to manage congestion. Those slots limit the number of flights in and out of Newark throughout most of the day, but also limit competition because no airline can fly in or out of the airport without a slot.
But according to the Justice Department's complaint, United now controls 902 of the 1,233 slots the Federal Aviation Administration has allocated to carriers at Newark Liberty, or 73 percent. It said that is more than 10 times more slots than its closest competitor. No other airline has more than 70 slots. The complaint also alleged that United does not use all the slots it controls at Newark. The airline "grounds" as many as 82 slots each day at Newark, essentially depriving Newark passengers of flight options that would exist if the slots were flown.
"United's large pool of Newark slots affords it tremendous flexibility to defend its dominance at Newark. It can neutralize rivals' efforts to enter or expand by adding flights to the route or routes that are threatened, making it difficult for rivals to attract enough passengers to operate profitably," the complaint said. "By contrast, United's existing competitors and new entrants with very few slots are limited in their ability to add service or shift flights to other Newark routes to counter United's initiatives."
Unused slots
The complaint said in the hands of anyone other than United, the additional slots would result in more competition for United at Newark. But the proposed acquisition by United will foreclose any such competition.
United officials disputed the Justice Department's assertion that its slots at Newark were going unused.
"United, like all airlines, varies flight schedules seasonally and by day of week to match changes in passenger demand. Our use of Newark Airport slots complies fully with FAA rules and enables us to offer the frequent flights and destinations travelers want while minimizing airport congestion, especially on bad-weather days," said Johnson.
Last week, though, five small airlines--Virgin America, Frontier Airlines, Allegiant Air, Spirit Airlines, and Alaska Air--petititoned federal aviation officials to open up takeoff and landing slots at Newark Liberty and other New York-area airports to let them compete with lower fares against the big carriers that dominate air travel in the region.
The Business Travel Coalition, an advocacy group, said it welcomed the news that the U.S. was looking to block the slot sale at Newark Liberty.
"This is an important day for business travelers who have been on the losing end of the Big Three U.S. carriers' stranglehold at Newark, where they control 91 percent of the slots and charge some of the highest fares in the country," said BTC founder Kevin Mitchell. "The highest and best use of those slots would be if they were in the hands of low fare airlines."
Ted Sherman may be reached at tsherman@njadvancemedia.com. Follow him on Twitter @TedShermanSL. Find NJ.com on Facebook.
