Justice Department sues United, Delta over Newark-Liberty agreement

The Justice Department is challenging a United and Delta plan to swap takeoff and landing slots at Newark   (Photo: United Airlines)

The Justice Department is challenging a United and Delta plan to swap takeoff and landing slots at Newark (Photo: United Airlines)

The Department of Justice is challenging in a civil lawsuit an agreement between United Continental Holdings and Delta Air Lines to swap takeoff and landing slots at Newark-Liberty International Airport (EWR) and John F. Kennedy International Airport (JFK). The deal would result in Delta gaining United's JFK slots and while providing in return 24 slots at EWR to United. The swap is part of United's plan to abandon Kennedy and centralize its New York City operations at Newark. It's unclear if the slots that Delta would give up would represent all of its EWR slots. If so, this move would effectively end the airline's service to Newark.

The Justice Department argues that the move would be anti-competitive by further limiting competition to United from other carriers to the airport.

A slot is essentially a license to compete at Newark. United already holds most of them, and as a result, competition at Newark is in critically short supply. United is already extracting a ‘Newark premium.’ Airfares at Newark are among the highest in the country while United’s service at Newark ranks among the worst. Allowing United to acquire even more slots at Newark would fortify United’s monopoly position, and weaken rivals’ ability to challenge that dominance, leaving consumers to pay the price.
— Assistant Attorney General Bill Baer, Antitrust Division, Department of Justice

My first reaction to Baer's comments is that the quality of service provided by United - good or bad - is not a concern of government at any level so long as nothing illegal is involved. The market alone should pass judgment on the quality of a business's offerings. Regarding the competitive angle, I can see some validity in DoJ's claim but I am not sure I agree that this deal is one that should fall within the purview of an antitrust lawsuit.

The argument that the swap would further solidify United's operational dominance at EWR does have some merit; this could certainly impact fares out of that airport. However, the New York City market is unique in that most cities don't have multiple major airports. In addition to EWR and JFK, New York has significant service from LaGuardia Airport (LGA) and, to a lesser degree, White Plains (HPN). I would argue that those airports provide competition to EWR and United in the broader New York market. While EWR is certainly more convenient for some travelers in the area, such submarket variations should not be something government at a federal level regulates. While I understand that the FAA, which assigns takeoff and landing slots, is a federal entity, we should be cautious at how how much federal authorities get involved with an industry's low-level market details. In my opinion, they should limit themselves to a macro view.

Personally, I would hate to see Delta abandon EWR. While I do not travel to New York City often, I did fly in and out of Newark this summer for my Deutschland Adventure vacation. I discovered that getting into Manhattan by train was pretty straightforward, much more so than from LGA or JFK. That being said, when returning to Atlanta on Delta, I preferred the actual airport facility at LaGuardia to that of Newark. These are all personal preference and exemplify the many facets of free market competition. Consumer decisions do not come down exclusively to price and, when looking for Atlanta to New York City flights to position for my European flight, I considered all New York airports for the best choice for me. In other words, all New York area airports were options and options represent competition.