BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) Complaint of Spirit Airlines, Inc. ) ) For Investigation of the Joint Venture ) Agreements announced by ) Docket OST-2021-0001 American Airlines and JetBlue Airways ) ) Under 49 U.S.C. §§ 41712 as an unfair method ) of Competition ) ) ______________________________) SUPPLEMENT TO COMPLAINT OF SPIRIT AIRLINES, INC. Communications with respect to this document should be sent to: Joanne W. Young David M. Kirstein Kirstein & Young, PLLC 1750 K Street, N.W. Suite 200 Washington, D.C. 20006 (202) 331-3348 (202) 331-3933 Attorneys for SPIRIT AIRLINES, INC. January 19, 2021 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) Complaint of Spirit Airlines, Inc. ) ) For Investigation of the Joint Venture ) Agreements announced by ) American Airlines and JetBlue Airways ) Docket OST 2021-0001 ) Under 49 U.S.C. §§ 41712 as an unfair method ) of Competition ) ) ______________________________) SUPPLEMENT TO COMPLAINT OF SPIRIT AIRLINES, INC. On January 7, 2021, Spirit Airlines filed a complaint in the above referenced docket stating that the public interest requires an on-the-record investigation under 49 U.S.C. § 41712(a) of the codeshare and related joint-venture agreements between American Airlines (AA) and JetBlue Airways (B6) to determine if implementation of these agreements would constitute an anticompetitive unfair method of competition that must be prohibited. Letters in support were submitted by Southwest Airlines and the National Air Carrier Association (“NACA”) which represents the U.S. ultra-low fare airlines. Several days later on January 10, 2021, the Department and the two airlines entered an agreement styled: “Agreement with U.S. Department of Transportation Regarding Northeast Alliance Between American Airlines, Inc. and JetBlue Airways Corporation” (the Supplement to Complaint of Spirit Airlines Docket OST-2021-0001 Page 2 “Agreement”).1 Based on “commitments” made by the two carriers in the Agreement, the Department terminated its review under 49 U.S.C. §41720 of the joint venture agreements that are the basis for the American and JetBlue Northeast Alliance (the “NEA”), enabling the carriers to move forward to implement the alliance. As explained in Spirit’s complaint, in reviewing the Delta/Continental/Northwest alliance in 2002, the Department not only made the carrier agreements available for review and comment, but on terminating the section 41720 review, it issued a lengthy notice which explained the specific anticompetitive elements of concern and how the extensive conditions imposed on the carriers would mitigate those concerns. In reviewing the American/JetBlue agreements, the Department did not take any of those steps. All the public has learned from the Agreement is that the parties “submitted cooperative agreements including code-sharing, frequent flyer, interline, revenue sharing and alliance agreements.” (Agreement at I). The Agreement continues that the alliance “optimizes each carriers network in the Northeast” by engaging “in code sharing, frequent flyer cooperation, sharing of existing assets, marketing, planning and revenue sharing.” According to the Agreement the purpose of the alliance is to generate “significant incremental growth in capacity,” which supposedly will benefit consumers. (Id). The carriers cannot discuss fares “within or outside of the NEA,” which of course would be an antitrust violation, (Id. at III.B.1.) but they can discuss: routes, scheduling, capacity and network adjustments as long as such discussions are limited to markets covered by the NEA. This level of coordination is highly problematic because, as explained in Spirit’s complaint and 1 The Department made the Agreement public through a link on the following page on its website: Alliances and Codeshares | US Department of Transportation added pm January 12, 2021. There was no Department press release announcing its action, and Spirit (and the public) only found out about the Agreement through a joint press release issued the same day by American and JetBlue. Supplement to Complaint of Spirit Airlines Docket OST-2021-0001 Page 3 confirmed in the supporting letters from Southwest and NACA, the slot-controlled airports which are the focus of the NEA are closed for expansion or new entry by other carriers including specifically low fare and ultra-low fare carriers – the very carriers which drive lower prices for consumers and best promote competition. The Department appears to recognize this competitive problem as it included in the conditions a modest divestiture of slots at JFK and DCA. However, the divestitures are minimal and, in the case of DCA, temporary such that it is difficult to see a low-fare carrier building new markets only to have to give them up in a few years. Without access to the agreements, it is impossible for the public to assess and comment on whether divesting 7 slot pairs at JFK and 6 temporary slot pairs at DCA and none at LGA, can even begin to offset the potential anticompetitive effects of the alliance. We know from public information that 14 slots at JFK represent only about 1.8 percent of the total slots that AA/B6 hold at LGA/JFK and that 12 slots at DCA are less than 2.5 percent of their total DCA slots. As noted in the Complaint, due to airport infrastructure constraints it is virtually impossible for carriers to grow at Boston Logan International (“BOS”). It also is a surprise that under III.E.1.a.(1) of the Agreement, the slot transfers effectively will not begin until mid-January 2022 while American and JetBlue could begin implementing the NEA last week. Depending on the business model of the carriers that acquire these slots, new service might begin a year and a half from now in between one and four markets each at JFK and DCA, while according to an American press release issued on January 12, 2021 the codeshare will involve 190 markets from JFK, LGA, EWR or BOS and hundreds of flights every day. The alleged offsetting consumer benefit from this unprecedented combination at the country’s most congested and least accessible airports is the commitment by American and Supplement to Complaint of Spirit Airlines Docket OST-2021-0001 Page 4 JetBlue to incrementally increase capacity at LGA+JFK by a total 15% over 2019 levels by 2025. Id at III.E.2.b.(1). However, it is far from clear how much this expanded capacity benefits the public versus just benefitting American and JetBlue while harming competition. Because of the constraints at the affected airports, the increase in AA/B6 capacity, most of which will likely come from substituting JetBlue aircraft for smaller AA regional jets on domestic routes, will be to shift traffic from other airlines as consumers are attracted by access to American’s global frequent flyer program - AAdvantage. Because new entry is blocked at all of the airports involved in the Agreement, there will be no new low-fare service to provide consumers with a needed option and discipline prices in these markets. Unlike on international trips, there is no double marginalization issue with this codeshare. Its primary purpose is to make American and JetBlue appear to have more flights in each market. And as discussed in the Complaint the codeshare effectively eliminates a competitor in 26 markets. See Complaint at ¶¶ 7-8. The Agreement sheds no light on what the impact of the alliance will be on competition, or whether the conditions accepted by American and JetBlue will offset the anticompetitive impact to any relevant degree. The Agreement creates more public interest questions about promoting the pro-competitive objectives set forth by Congress in the Airline Deregulation Act, 49 U.S.C §40101(a) than it provides answers to the serious competition issues raised in the Complaint. The Notice issued on January 12, 2021 by the Assistant General Counsel for the Office of Aviation Consumer Protection, in this docket states: The Department will evaluate the record in the docket initiated by Spirit in due course and determine if there is sufficient basis to conclude that an investigation would be in the public interest. Supplement to Complaint of Spirit Airlines Docket OST-2021-0001 Page 5 The American/JetBlue alliance runs directly counter to the decade long effort by the Department and the Department of Justice to promote competition at all the airports involved in this Agreement. The risk of competitive harm and the negative impact on consumers cannot be overstated, as the two carriers move forward with their joint venture. For these reasons Spirit respectfully urges the Department to immediately initiate the requested investigation under 49 U.S.C.§41712. Respectfully submitted, Joanne W. Young David M. Kirstein Counsel for Spirit Airlines, Inc. January 19, 2021 CERTIFICATE OF SERVICE I hereby certify that on January 19, 2021 I caused to be served by email a copy of the foregoing Supplement to Complaint on the following persons: American [email protected] [email protected] [email protected] [email protected] JetBlue [email protected] [email protected] National Air Carrier Association [email protected] Southwest [email protected] [email protected] [email protected] DOT [email protected] [email protected] /s/Laura Beth Jackson Laura Beth Jackson .