AC_A340 From Canada, joined Sep 1999, 2251 posts, RR: 1 Posted (14 years 8 months 2 days 3 hours ago) and read 3435 times:
Spirit Airlines has officialy launched a lawsuit against Northwest Airlines. It accuses the airline of predatory pricing and that it muscled them out of several Detroit routes in the mid '90's. It appeared in the Fort Lauderdale Herald on Friday March 31.
AC_A340 From Canada, joined Sep 1999, 2251 posts, RR: 1
Reply 1, posted (14 years 8 months 2 days 2 hours ago) and read 3315 times:
Sorry, it was the Miami Herald, not the Fort Lauderdale Herald
Published Friday, March 31, 2000, in the Miami Herald
Northwest faces legal battle
Airline accused of unfair pricing
BY JOSH L. DICKEY
MINNEAPOLIS -- Northwest Airlines, no stranger to accusations of unfair competitive practices, faces a new legal challenge by a low-fare carrier that says Northwest muscled it out of several routes from Detroit in the mid-1990s.
Spirit Airlines, a low-fare carrier based in Fort Lauderdale, said in a complaint filed in a Detroit federal court Wednesday that Northwest forced it to abandon flights from Detroit to Boston and Philadelphia by slashing prices and flooding those routes with new flights.
Northwest, the nation's fourth-largest carrier, dominates service in Detroit, one of its three hubs, with about 75 percent of all passengers who pass through Detroit Metro Airport. Spirit handles about 2 percent of Metro's passengers, flying mostly to East Coast resort cities.
Northwest, based near Minneapolis, said in a statement Thursday that it has competed fairly. Northwest contended that Spirit is healthy, citing that it has opened new routes and acquired more aircraft.
Spirit's complaint alleges that Northwest's reaction to its emergence in the market was predatory pricing: willfully losing money in the short term to drive out competition, then recovering losses by raising prices.
The lawsuit also alleges Northwest thwarted Spirit by charging discriminatory prices for access to gates it controlled.
``The idea is to teach low-cost new entrants a lesson: Don't mess with our hub,'' said Albert Foer, president of the American Antitrust Institute in Washington, D.C.
But it's nearly impossible to prove in court, Foer said. The challenge lies in demonstrating that the major competitor operated at a loss in the particular market and strove to recoup losses in that same market.
Companies like Northwest that operate in networks are capable of recovering losses elsewhere.
Spirit is not the first small rival to complain to regulators that Northwest maintains a stranglehold on its markets.
Earlier this week, AirTran Airways, the former ValuJet, said it would reconsider planned service from the Twin Cities to Atlanta after Northwest added 40 percent more seats to the route. Northwest maintains it decided to add the seats before AirTran announced its intentions, and the purpose was to compete with Atlanta-based Delta Airlines, not AirTran. Two members of Congress and the Twin Cities' Metropolitan Airports Commission want federal officials to investigate.
Another complaint came from Sun Country Airlines, a small carrier based in suburban Minneapolis, which began scheduling low-fare flights last summer to markets served by Northwest.
Last October, Sun Country complained when Northwest excluded a big Minneapolis area travel agency from Northwest's discount ticket promotions. That agency had sold more Sun Country tickets than any other agency in Minnesota.
Northwest also banned the courtesy practice of selling airline parts to Sun Country and discontinued arrangements in which Sun Country paid Northwest to use its facilities for crew training. Both moves sent the smaller airline scrambling.
And now-defunct carriers Reno Air, Kiwi Airlines and Access Air have all complained of being bullied by Northwest.
In a case similar to Spirit's, the Justice Department accuses Dallas-based American Airlines of undercutting fares to drive out tiny Vanguard Airlines. American raised its fares once Vanguard withdrew, according to the lawsuit.
Foer said it's the first such suit brought in a generation and will help determine the future of airline regulation.