The Department of Justice announced today that United Continental Holdings Inc. (United) abandoned its plans to purchase 24 take-off and landing authorizations – or “slots” – from Delta Air Lines Inc. (Delta) at Newark Liberty International Airport (Newark).
On Nov. 10, 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 Federal Aviation Administration (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 and Delta decided on April 5, 2016, to terminate their slot purchase agreement.
“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.”
Newark take-off and landing slots were created by the 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 are more than 10 times greater than those of any other airline: United holds 902 slots; no other airline has more than 70. The transaction abandoned today would have increased United’s slot holdings at Newark to 926, or around 75 percent.
United Continental Holdings Inc. is a Delaware corporation headquartered in Chicago. Last year, United, the third largest airline in the world in terms of revenues, flew over 138 million passengers to over 352 destinations throughout the world.
Delta Air Lines Inc. is a Delaware corporation headquartered in Atlanta. Last year, Delta, the second largest airline in the world in terms of revenues, flew over 170 million passengers to 316 destinations throughout the world.