Low-fare carriers in the US are avidly watching how a predatory pricing complaint against United Airlines by one of their number, Frontier Airlines, pans out. A win for the minnow could encourage other no-frills operators to follow suit.
Denver-based Frontier has asked the Department of Justice to investigate eight counts of alleged antitrust violations by United, ranging from capacity dumping to exclusive dealing with corporate customers and commuter carriers.
In one example the carrier claims United added an average of 8,600 seats a week in the Denver-Los Angeles market during peak summer months after Frontier entered that market. Frontier president and chief executive officer Sam Addoms says such moves illustrate United's determination 'to totally rule the roost here'.
Frontier says this is not a local occurrence. It sees predatory practice by the US majors against low-fare airlines as a trend which has developed since the ValuJet crash last March.
ValuJet agrees. The airline, which operates out of Delta Air Lines' main hub at Atlanta, describes what has been happening this year as not merely healthy competition, 'but predatory and vicious intent to drive us out of business'. ValuJet withdrew an Atlanta-Mobile, Alabama, service in January because it was unable to make the route profitable. Within 24 hours, Delta raised its fare from $58 to $404. ValuJet reinstated a daily service after pleas, and a revenue guarantee incentive, from Mobile airport officials. 'Our loads have doubled since we put back a service, and, miraculously, the big guy's fares have dropped again to $58,' says ValuJet.
Both United and Delta vehemently deny the allegations and are adamant their practices are legal. Barbara Beyer, president at Avmark consultants, agrees. 'The majors are essentially right; they are not doing anything wrong. You meet new entrants dollar for dollar price-wise and then add capacity so they cannot fill their seats. That is perfectly legal. It might look like Bambi meets Godzilla, but it's really just healthy competition.'
Frontier's case will be difficult to stand up in court. Michael Goldman at transport law firm Bagileo, Silberg & Goldman says a predatory pricing claim requires the plaintiff to prove intent by the defendant to drive its competitor out of business. 'That has been very difficult to do historically.'
He suggests it would be easier to make a case with the Department of Transportation, where Frontier would only have to demonstrate unfair methods of competition to ensure action, but the DOT has more limited remedial powers.
Frontier's campaign has the support and sympathy of many similar airlines, including fellow Colorado-based operator Western Pacific, and comes as the smaller carriers launch their own lobby group, the Air Carrier Association.
Source: Airline Business