Antitrust Law Daily Wrap Up, ANTITRUST NEWS: United Airlines abandons plans to acquire 24 slots from Delta at Newark airport, (Apr 6, 2016)

By Linda O’Brien, J.D., LL.M.

United Continental Holdings, Inc. has abandoned its plans to purchase 24 take-off and landing authorizations—or “slots”—from Delta Air Lines, Inc. at Newark Liberty International Airport, the Department of Justice (DOJ) Antitrust Division announced today. In a stipulation of dismissal filed today, the DOJ stated that United terminated the agreement that was the subject of the litigation and the DOJ voluntarily dismissed the antitrust claims asserted against United and Delta (U.S. v. United Continental Holdings, Inc., Case No. 2:15-cv-07992).

In 2015, Chicago-based United was the third largest airline in the world in terms of revenues, having flown over 138 million passengers to over 352 destinations throughout the world. Delta, headquartered in Atlanta, was the second largest airline in the world in terms of revenues, having flown over 170 million passengers to 316 destinations throughout the world.

According to the DOJ announcement, Newark take-off and landing slots were created by the Federal Aviation Administration (FAA) in 2008 to manage congestion by limiting the number of flights that can serve the airport during the majority of the hours of the day. Slots are scarce, and airlines at Newark—especially low-cost carriers—have had difficulty obtaining slots to offer new air service. United controls 73 percent of the slots at Newark and its slot holdings of 902 are more than 10 times greater than those of any other airline. The transaction with Delta, entered into in June 2015, would have increased United’s slot holdings at Newark to 926, or around 75 percent.

In November 2015, the department filed suit to block the proposed acquisition, alleging that it would violate Sections 1 and 2 of the Sherman Act by increasing from 73 percent to 75 percent United’s already dominant share of slots at Newark, one of the nation’s most important airports. The complaint alleged that the enhancement of United’s dominant position would subject air-travel passengers at Newark—who already pay some of the highest fares in the nation—to higher fares and fewer choices.

On April 1, 2016, the FAA announced that it plans to lift slot controls at Newark, which will ease entry and promote competition at the airport. The FAA explained that capacity exists for additional flights at Newark, in part because slots that have been allocated are not being fully utilized. At the same time, the existence of slot constraints has forced the FAA to deny requests from United’s competitors to add service. As alleged in the department’s complaint, United “grounds” more slots on any given day than any of its competitors have the option to fly, while keeping them out of the hands of potential competitors.

Following the FAA’s announcement, United informed the department that the two companies decided to terminate their slot purchase agreement since the transaction was no longer viable. Based on United’s representations, the DOJ filed a stipulation of dismissal.

“This is a great win for Newark travelers and for all American consumers,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “United has used its slots monopoly to dominate air travel in and out of Newark. 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.”

Attorneys: Eric Mahr for the U.S. Department of Justice. Justin T. Quinn (Robinson Miller LLC), Kent A. Gardiner (Crowell & Moring LLP), and Paul L. Yde (Freshfields Bruckhaus Deringer US LLP) for United Continental Holdings, Inc. Amy Walker Wagner (Stone & Magnanini LLP) and James P. Denvir (Boies, Schiller & Flexner LLP) for Delta Air Lines, Inc.

Companies: United Continental Holdings, Inc.; Delta Air Lines, Inc.

News: Antitrust AntitrustDivisionNews