Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Justice Department Does Not Intend to Challenge Combination of Fixed-Base Operators at Connecticut Airport, (Jan 3, 2013)

By Tobias J. Gillett, J.D., LLM.

The Department of Justice Antitrust Division does not intend to challenge a joint venture between the only fixed-base operators (FBOs) at Groton-New London Airport in Groton, Connecticut, even though the venture would result in a single FBO serving the airport, the Department has announced. Renata B. Hesse, Acting Assistant Attorney General, has sent the counsel for the FBOs, Columbia Fuel Services Inc. (CFS) and Lanmar Aviation Inc. (LA), a business review letter, setting forth the Department’s view that the joint venture, to be called Mystic Jet Center, would not likely produce anticompetitive effects.

Fixed-base operators provide a range of flight support services to aviation service providers, including fuel, ramp and hangar rentals, office space rentals, pilot lounges, baggage handling, and flight planning support. According to CFS and LA, flight operations at Groton-New London Airport had declined 26 percent between 2006 and 2011. This had resulted in significantly decreased profitability for both companies, particularly due to declines in fuel sales, from which the FBOs derived the vast majority of their revenue.

CFS was the sole FBO at the airport from 1984 to 2003, when LA became an FBO there. The FBOs claimed they had both required substantial financial support from third parties since 2003.

The Antitrust Division concluded that “it does not appear likely that the proposed joint venture between CFS and LA will produce anticompetitive effects,” even though Mystic Jet Center would become the sole FBO at the airport. The Antitrust Division identified three factors that would prevent the joint venture from imposing supra-competitive prices, including “(1) the pricing and availability of aviation fuel and hangar storage at surrounding airports; (2) the ability of modern private aircraft to tanker fuel; and (3) the availability of developable land for future and additional FBOs at the Airport.” The availability of alternatives to the services provided by the FBOs and the possibility of entry by new competitors would control the ability of Mystic Jet Center to raise prices above a competitive level, in the Antitrust Division’s view.

News: Antitrust AntitrustDivisionNews