New York State is prepared to go to court on antitrust grounds to halt the proposed merger of US Airways and United Airlines if the carriers don't take steps to ensure air fare competition for passengers flying from upstate markets, state Attorney General Eliot L. Spitzer warned Wednesday.
Spitzer, along with a fellow Democrat, U.S. Sen. Charles E. Schumer, said the airlines, at a minimum, should give up some of their prized landing slots at two key airports -- New York's LaGuardia and Washington's National Airport -- to smaller, low-cost carriers flying out of Buffalo, Rochester and the other upstate markets where air fares traditionally have been higher than the national average.
"They want this deal? They've got to give something up," Spitzer said, raising a threat to try to halt or impose conditions on the $4.3 billion merger if the airlines do not guarantee additional upstate air fare competition.
Spitzer, who like other state attorneys general has been meeting with top airline officials in recent weeks to discuss the proposed merger, said he is confident the two airlines understand the competition concerns being raised and will take steps to allay the state's worries. But, he said, his office is considering a court challenge if the matter is not resolved soon.
It is unclear exactly how a challenge by New York alone could stop the merger entirely; there is little precedent for such legal action by the state involving the airline industry. However, Spitzer, by going the court route, may be able to exact conditions -- with the help of a federal or state court judge -- involving upstate air competition.
Spitzer and Schumer, who last year came out against the merger unless certain conditions were met, released a breakdown of how the buyout of US Airways by United would affect competition from upstate markets to certain cities around the country. In particular, travelers from Buffalo to the seven Western cities in which the two carriers currently compete head to head could see competition diminished, the two Democrats said.
For instance, if the merger goes through, the new combined airline would control 38 percent of the flights from Buffalo to Los Angeles, 40 percent of the flights to Phoenix and 46 percent of the flights to San Francisco.
Spitzer said the two airlines, once merged, would control 40 percent of the landing slots at LaGuardia Airport, a major destination for travelers from Buffalo to New York City or those transferring to flights to other cities.
"That is simply too high," he said, calling such control "a threat to meaningful price competition."
Instead, Spitzer said the airlines should sell or somehow provide some of the slots at LaGuardia to an upstart carrier such as AirTran and JetBlue that would then make some guarantees about servicing the upstate markets.
Both Spitzer and Schumer criticized the current plan by US Airways to sell its 222 slots at National Airport to DC Air, a new carrier. Schumer has said that carrier would do little to lower air fares in upstate, and Spitzer on Wednesday said there are "some serious questions whether the new entity will be the kind of competition we'd like to see enter this market."
Schumer said he is further concerned about DC Air because it would be 40 percent owned by American Airlines. He said he asked for a commitment by DC Air owners that it would not sell the rest to American, and they refused.
Schumer and the owner of DC Air, Black Entertainment Television founder Robert Johnson, recently got into a public battle after Johnson suggested racism is behind the senator's opposition to his airline plan. Johnson said Schumer is promoting his airline competitors JetBlue and AirTran "perhaps -- because they are white business people." Schumer denied the claim.
The US Airways and United merger is still being studied by the federal Justice and Transportation departments. But state attorneys general have also begun their own examination of the merger to see if it meets antitrust concerns.
Officials with both United and US Airways defended the proposed merger and its effect on competition.
"We clearly respect and appreciate the concerns expressed by the attorney general, and we will continue to work closely with him on this merger approval process," said US Airways spokesman Richard Weintraub.
Both Weintraub and United spokeswoman Susana Leyva declined to discuss specific demands voiced by Spitzer and Schumer about giving up some of their landing and takeoff slots at LaGuardia and Washington National airports.
Leyva said the six national carriers servicing upstate already provide consumers with price competition, which has been further fueled by the introduction of Southwest Airlines and other low-cost carriers in the past couple of years.
"We remain committed to working with Attorney General Spitzer and Sen. Schumer, as well as all of the other parties, to outline what we think are very strong consumer benefits of our merger," Leyva said.
Spitzer refused to provide specifics of what he is looking for in the way of solutions from the airlines, though he did suggest, for instance, that the merged company should give up, as a start, about 8 percent of its slots at LaGuardia to other carriers that would fly to the upstate markets.
"The ball is in their court," Spitzer said of the airlines, adding, "The deal, as currently structured, is flawed."
Of the talks he has had with airline executives, he said, "Nothing they've proposed to us is sufficient."
Schumer said the threat of the lawsuit by Spitzer and the involvement of several other state attorneys general "adds a great deal of strength to our case to the Justice Department that they ought to make sure competition prevails."
Spitzer would not give a timetable for court action if the airlines don't accommodate his demands.