DOJ seeks to block United and Delta deal for Newark access

The Justice Department sued Tuesday to block a proposed deal between United and Delta airlines to swap access between their New York City-area hubs, in an effort to preserve competition at Newark Liberty International Airport.

United wants to abandon John F. Kennedy International Airport and give its allocation of landing and takeoff slots at the congested airport to Delta. In exchange, Delta would give its Newark slots to United. The deal would allow the airline to consolidate flights at its own hub.

The lawsuit reflects the intense competition for slots that the Federal Aviation Administration allocates at congested airports in the New York area. Southwest,JetBlueand Virgin America have each urged the government to broaden access to New York-area slots or enable more trading of them.

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The lawsuit argues that if United acquired 24 more takeoff and landing slots at Newark, it would so dominate the flight schedule that it would discourage other airlines from serving from the airport that sees 35 million travelers each year, enabling United to charge higher fares.

"We know that airfares at Newark are among the highest in the country while United's service at Newark ranks among the worst," Assistant Attorney General Bill Baer told reporters.

The lawsuit asks the U.S. District Court of New Jersey to prevent United from acquiring Delta's slots at Newark and for United to warn the Justice Department about any other attempts to gain Newark slots for at least five years.

United already controls 73% of the slots at Newark, or 902 out of 1,233 allocated. That total is 10 times more than its closest competitor because no other airline has more than 70 slots at Newark, the lawsuit contends. United already grounds as many as 82 slots each day, which is more than any other competitor can even fly, the lawsuit contends.

"Yet United wants more," the lawsuit said. "As a result, passengers at Newark would face even higher fares and fewer choices."

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United said the New York area has plenty of competition.

"With three major airports, the New York/Newark area is the most competitive air transportation market in the country," said Rahsaan Johnson, a United spokesman. "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. We will vigorously defend our ability to operate effectively, efficiently and competitively at Newark."

Delta Air Lines did not respond to a request for comment.

Kevin Mitchell,founderof the Business Travel Coalition, which advocates for corporate travel managers, said the lawsuit as an important step toward reducing the "stranglehold" of the three largest airlines – American,Deltaand United – in the New York area.

"The highest and best use of those slots would be if they were in the hands of low-fare airlines like Frontier, Allegiant, JetBlue or Spirit," Mitchell said.

Global Gateway Alliance, a business and academic group that advocates for New York City-area airports, has long called for an end to the 2008 slot rules that haven't reduced congestion, alliance chairman Joe Sitt said.

"Slot rules and flight caps discourage competition, put arbitrary constraints on growth, and worst of all haven't relieved delays and congestion – the reason the FAA put them in place," Sitt said. "New York's airspace remains the most congested in the country and our airports the most delayed."

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United and Continental merged in 2010, with Continental holding 894 slots at Newark and United 36. The Justice Department insisted that United give up its 36 slots, which all went to Southwest Airlines.

WithSouthwestcompetition, the lawsuit said fares went down on five routes: By 27% on flights to St. Louis, 15% on flights to Houston, 14% on flights to Phoenix, 11% on flights to Chicago and 5% on flights to Denver.

"Competition benefits consumers," Baer said.

United to end service at JFK, focus on Newark

Despite the divestiture, the Justice lawsuit said United has tried three times to increase its slot dominance. In July 2014, United proposed taking back the slots fromSouthwestand in March 2015, the airline proposed acquiring 18 Newark slots from American Airlines, in exchange for 26 at JFK.

The latest proposal came inJune,when United and Delta announced they would consolidate at their hubs. The proposal was for United to lease 22 year-round slots and two March-to-October slots from Delta for $14 million, according to the lawsuit. In exchange, Delta would leave 24 year-round, three summer and three winter slots at JFK also for $14 million, the lawsuit said.

The slot restraints at Newark run from 6 a.m. to midnight. Each slot represents permission to take off or land during a half-hour period. Newark can handle a maximum 81 takeoffs or landings per hour, but FAA hasn't allocated all possible slots at the airport.

Beginning Oct. 25, United shifted its Premium Service called "p.s." from JFK to Newark for flights to San Francisco and Los Angeles.