BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Complaint of Spirit Airlines, Inc. For Investigation of the Joint Venture Agreements announced by American Airlines and JetBlue Airways Docket DOT-OST-2021-0001 Under 49 U.S.C. §§ 41712 as an Unfair Method of Competition SUPPLEMENT TO COMPLAINT BASED ON MARKET IMPLEMENTATION OF AMERICAN’S STRATEGIC PARTNERSHIPS 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 700 Washington, D.C. 20006 (202) 331-3348 [email protected] [email protected] Counsel for Spirit Airlines, Inc. May 12, 2021 TABLE OF CONTENTS I. Ninety-six percent (96%) of NEA codeshares overlap at airports with American-Alaska codeshares, enabling marketing advantages and facilitating anticompetitive conduct throughout the country ........................ 4 a. American has secured unique and never-reviewed unfair competitive advantages by linking its two Strategic Partnerships throughout the largest domestic air travel markets ....................................................................................... 5 b. Market activity suggests anticompetitive price-signaling is already occurring in markets covered by the Strategic Partnerships’ codeshares ................................ 8 c. American has expressly identified its plans to leverage its Strategic Partnerships to dominate markets nationwide ....................................................... 10 II. Nearly 50% of all FAA slots are being leveraged by American and JetBlue to stifle competition at access-restricted airports and beyond ..... 13 a. The American-JetBlue slot and gate cache allows them to forego innovation and dominate markets by increasing service beyond what is possible for other airlines ...................................................................................................................... 14 b. American and JetBlue are promising higher fares and underserved demand to shareholders and financial analysts based on their coast-to-coast market domination from access-restricted airports ............................................................. 18 c. Tacit coordination outside NEA markets is allowed and presents a serious flaw that could have been identified through public input ..................................... 21 III. Much is still unknown about American’s Strategic Partnerships – the NEA conditions fail to address even the known concerns.............................. 22 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Complaint of Spirit Airlines, Inc. For Investigation of the Joint Venture Agreements announced by American Airlines and JetBlue Airways Docket DOT-OST-2021-0001 Under 49 U.S.C. §§ 41712 as an Unfair Method of Competition SUPPLEMENT TO COMPLAINT BASED ON MARKET IMPLEMENTATION OF AMERICAN’S STRATEGIC PARTNERSHIPS The need to supplement Spirit’s complaint arises from apparent unfair methods of competition by American, through its alliances with JetBlue and Alaska Airlines to coordinate air service and pricing to the detriment of travelers and competition, contrary to the public interest as defined in the policy statement of the Airline Deregulation Act, 49 U.S.C. §40101. American’s “Strategic Partnerships” with JetBlue and Alaska Airlines are the ultimate result of the former Secretary’s refusal to seek public comment and instead use a secretive review process to approve the Northeast Alliance (NEA) on her last day in office. Encouraged by the previous administration’s unjustified sign off on the NEA, American – together with the fifth and sixth largest airlines, Alaska and JetBlue – now seems emboldened to further erode competition in an already highly- Supplement to Complaint Based on Market Implementation of American’s Strategic Partnerships Docket DOT-OST-2021-0001 May 12, 2021 Page 2 consolidated air travel industry. Significantly, American-JetBlue codeshares overlap at a near 100% rate with airports covered by American-Alaska codeshares. And flights combining routes across these now intertwined Strategic Partnership networks are already being sold by American – directly undermining the Congressionally-imposed pro-competitive policy the Secretary by law is required to consider.1 The Strategic Partnerships amplify the NEA’s anticompetitive harms and allow American to dominate hundreds and potentially thousands of markets beyond what was previously expected. The blatant actions of these carriers to reshape competition using publicly-owned but highly-constrained resources (including at all Level 2 and Level 3 airports as well as at Washington Reagan and Boston Logan) underscore the immediate need for an investigation with public participation pursuant to the DOT’s statutorily assigned authority under 49 U.S.C. § 41712. Through this deepening market consolidation, American can now raise prices, limit true competition by the subservice carriers (Alaska and JetBlue), and block new entry at New York, Boston, and Washington Reagan airports. While American implements this game plan with its willing partners, there is not even a hint in the DOT-American-JetBlue Agreement that these grave concerns were considered. A public input process would certainly have identified these anticompetitive harms 1 49 U.S.C. §40101. (“In carrying out subpart II of this part… the Secretary… shall consider the following matters, among others, as being in the public interest….” (emphasis added)). Supplement to Complaint Based on Market Implementation of American’s Strategic Partnerships Docket DOT-OST-2021-0001 May 12, 2021 Page 3 along with the restrictions necessary to mitigate their negative impact on the traveling public. Congress exclusively committed to the Secretary of Transportation responsibility under 49 U.S.C. §41712 to investigate in the public interest, on the Secretary’s own initiative or on complaint by another airline, unfair methods of competition specific to the commercial air transportation industry. This public interest review includes practices encompassing incipient anticompetitive behavior beyond actions directly violating the Sherman or Clayton acts.2 The Department’s industry expertise and ability to seek public input on competitive concerns is not held by any other state or federal investigative body. The Department must use these unmatched resources to protect the traveling public from the harms posed by the Strategic Partnerships agreements. It bears emphasis that the Department recognized immediate scrutiny might be required when it included Section VII. C. in the DOT-American-JetBlue Agreement which specifically affirms DOT’s ability to exercise its statutory (§ 41712) and regulatory authority to investigate anything American and JetBlue might do contrary to the public interest. 2 Pan American World Airways, Inc. v. United States, 371 US 296, 307(1963) (“The provision was designed to supplement the Sherman Act by stopping ‘in their incipiency those methods of competition which fall within the meaning of the word ‘unfair.’…Whatever the unfair practice or unfair method employed, §411 of this Act [(now 49 U.S.C. § 41712)]…was designed to bolster and strengthen anti-trust enforcement.” (internal citations omitted)). This authority was directly carried over by Congress in the Airline Deregulation Act. Supplement to Complaint Based on Market Implementation of American’s Strategic Partnerships Docket DOT-OST-2021-0001 May 12, 2021 Page 4 The obligation to hold a robust investigation – where public comment is invited and results in a reasoned decision – is made manifest by the fact that Spirit’s complaint is supported by stakeholders representing all major segments of the industry, labor, and the public. This is reflected in the filings by Southwest Airlines, the National Air Carrier Association, United Airlines, virtually all U.S. airports through ACI-NA, the American Antitrust Institute, airport workers through the Service Employees International Union (SEIU), and travelers through public interest groups including Travelers United. Not one non-party filing has been submitted opposing Spirit’s request for an on-the-record investigation. I. Ninety-six percent (96%) of NEA codeshares overlap at airports with American-Alaska codeshares, enabling marketing advantages and facilitating anticompetitive conduct throughout the country As a result of not instituting an on-the-record proceeding, the Department apparently failed to consider – and certainly to publicly address – a key aspect of the NEA: American’s expansive codeshare partnership with Alaska Airlines, creating overlap for 96% of American-JetBlue codeshares and 77% of American-Alaska codeshares at airports across the country.3 The Department’s analysis in the review of the Delta/Continental/Northwest alliance agreements established a roadmap for assessing American’s expansive codeshare network created by linking flights operated by Alaska and JetBlue: Here, … multiple carriers would join forces in many different ways, making it extremely difficult … for other 3 See Exhibit 3. Supplement to Complaint Based on Market Implementation of American’s Strategic Partnerships Docket DOT-OST-2021-0001 May 12, 2021 Page 5 carriers to respond effectively, and thus forcing those competing carriers to exit some markets. Unaligned carriers could be particularly vulnerable to the unprecedented market power of the … alliance, and many could be weakened or cease to exist. … [P]otential harm would result primarily