Aviation Industry Updates: October 4, 2022

Justice Department’s Fight with JetBlue and American Airlines Heads to Court

• The Justice Department heads to court in Boston on Tuesday in hopes of undoing a year-and-a-half-old pact between American Airlines and JetBlue Airways in the Northeast U.S.

• The carriers argue the deal allows them to better compete against larger airlines. But the Biden administration contends the agreement is effectively a merger that will drive up fares. Last September, the Justice Department along with the attorneys general of six states and the District of Columbia sued to block the partnership, which was approved in the final days of the Trump administration.

• The antitrust trial will be a test for President Joe Biden’s Justice Department, which has been tasked with taking a hard stance against threats to competition.

• However, the antitrust push has run into obstacles. Earlier this month, a federal judge denied the Justice Department’s bid to block UnitedHealth’s acquisition of Change Healthcare. Last week, another federal judge rejected the DOJ’s bid to stop a merger between two major U.S. sugar refiners.

• The trial against the airline alliance comes as JetBlue is in the process of trying to acquire discount carrier Spirit Airlines for $3.8 billion to create the country’s fifth-largest airline, a deal that faces a high hurdle with regulators, though that partnership isn’t a part of the lawsuit.

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Delta & LATAM Win Final Approval For Joint Venture

KEY POINTS:

• Look for Delta to soon offer an enhanced relationship with its South American partner, LATAM.

• The U.S. Department of Transportation granted final approval on Friday to the Atlanta-based carrier's joint venture with its South American partner, LATAM. LATAM has operations focused in Chile, Brazil and a number of other countries on the continent.

• With the new partnership, Delta and LATAM will split revenue on flights between the U.S. and Canada and South America. The deal comes with antitrust immunity, meaning that the two airlines will be allowed to coordinate on schedules and fares in those markets.

• “Delta’s partnership with LATAM will help grow the market between North and South America and provide significant and much-needed benefits for customers, and we applaud the DOT for this final approval,” Delta CEO Ed Bastian said in a statement. “Now, we’ll get to work with LATAM to transform the travel experience for our collective customers and create new opportunities for our employees.”

• Friday's news is not a surprise; DOT had granted tentative approval to the deal in June, and there was very little that could have derailed the deal since then.

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United Suspending JFK Service

KEY POINTS:

• United Airlines is temporarily halting service at New York’s JFK Airport, saying its schedule there is too small to remain competitive.

• In a note shared with CNN Business, the airline said the start of the winter season, when more airlines resume flying to and from JFK, contributed to its “difficult decision.”

• “The significance of JFK to our operation hasn’t changed — we think New York customers deserve more choices, and robust United service to JFK is good for our customers, our employees and our airline,” United said in the letter. “As a result, we will continue our pursuit of a bigger and more desirable schedule for our customers and be ready to seize those opportunities if and when they surface.”

• United has been negotiating with the FAA to acquire additional slots, or takeoff and landing authorizations, at JFK and advocating for the agency to update its assessment of the airport’s capacity. United said its discussions with the regulator have been “constructive” and that it is clear the FAA is serious about operational improvements in the New York region.
  But United said these improvements would take time.

• “The FAA is dedicated to doing its part to safely expand New York City airports and airspace capacity” the agency said in a statement Sunday. “We will follow our fair and well-established process to award future slots to increase competition between airlines so passengers have more options.

CNN

Frontier Airlines Prospects Rise With JetBlue-Spirit Deal

KEY POINTS:

• Frontier Airlines CEO Barry Biffle thinks his airline’s outlook is better than ever after JetBlue Airways beat it in a bidding war for budget competitor Spirit Airlines.

• “Ninety-five percent of U.S. capacity will be 30 to 80 percent higher cost than us,” Biffle said in an interview Thursday. One of his main focuses at Frontier is using low costs as a competitive advantage and, by JetBlue buying Spirit and bringing it up to the former’s cost levels, many see the deal as an elimination of Frontier’s main low-cost competitor in the U.S.

• Airlines compare their expenses using the metric unit costs — measured by costs per available seat mile — excluding fuel. In the second quarter, Frontier’s unit costs excluding fuel were 7.24 cents, Spirit’s were 6.96 cents, and JetBlue’s were 9.68 cents. Put another way, JetBlue’s costs are 33 percent higher than those at Frontier. The combination of JetBlue and Spirit will leave Frontier as one of the only airlines serving major markets with very low costs in the U.S.

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Additional ReadingAs shared with us in a recent memo:

• "Early this year, the Company notified SAPA of a shortage of Captain and consequently the need for First Officers to upgrade.  The Company and SAPA worked together to implement incentive programs and remedy some of the shortfalls associated with the upgrade shortages.  Throughout the year, the Company has not received enough Captain upgrade bids compared to the Captain vacancies."
• "During this time, SAPA has continued communicating the possibility that the Company might be junior manning First Officers into Captain slots."
• "The Company has made it clear that without sufficient movement to upgrade, they plan to exercise existing policy allowing for pilots to be involuntarily assigned an upgrade class per SP 3023.7.C"
• "If there are no current bids to fill a required vacancy, assignments may be made in inverse order of seniority."