United has already abandoned New York Kennedy in a deal in which United traded its Kennedy slots for 24 of Delta’s Newark slots. Today, the U.S. Department of Justice said not so fast, suing to block the deal on anti-competition grounds.
“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.
On what basis? Here’s an interesting statistic: Bureau of Transportation Statistics show that Newark had the highest average fares of all major U.S. airports at the start of 2015. Another stat: United already controls 73% of slots at Newark, 10 times that of its closest competitor.
And low-cost competitors are not happy about that.
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.
I have not found transcon fares prohibitively expensive (I bought essentially walk-up fares on my last trip to New York for $189 each way), but perhaps that is because of the competition on the route that does not exist between many other city pairs.
Could United Return to JFK?
So if the DOJ is successful in blocking United taking over Delta’s Newark slots, does that mean that United will get back its JFK slots?
Probably not.
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.
Here’s my prediction. United will not get all 24 slots. Maybe they will get a dozen, maybe not even that. We will see the others distributed (sold) to low-cost-carriers in order to bring just a bit of competitive pressure to Newark. Some routes will see new competition and reduced prices, most will remain high.
We’ve seen over the years that mergers do not help consumers…I’ve beat that horse dead on this blog. Even with prices stagntant overall, loyal programs have been eviscerated to the detriment of consumers. A consolidation of three powerful carriers in the USA has led to higher fares even in this new era of low oil prices. It is no surprise that these entrenched carriers do not want competitors in their backyards, but the DOJ is right to express concern over the high prices were are statistically seeing from Newark and the dominance of a single carrier.
Matt,
As an employee of a TMC, I have done extensive research on this subject of airline consolidation and ATP. I am also a huge proponent of competition. However, I can tell you that while ATP may have gone up on select city routes, in general airfare in the US has remained stable or gone down slightly over the last 4 years. So while I don’t agree with the mergers, they haven’t proved to be harmful to the consumer.
Flying from Houston(IAH) is even worse….far more expensive flights than EWR