Alaska Airlines settles antitrust case

By S. Laney Griffo | Dec 18, 2016

Plaintiffs in the case against the acquisition of Virgin America by Alaska Airlines agreed to settle on Dec. 7.

Alaska Airlines settles suit over acquistition.   Shutterstock

SAN FRANCISCO — Plaintiffs in the case against the acquisition of Virgin America by Alaska Airlines agreed to settle on Dec. 7.

The anti-trust complaint was filed by San Francisco attorney Joseph Alioto on Sept. 8 on the behalf of more than 40 consumers. Alioto decided to file this case because of his concern over the airline industry as a whole.

“The airline industry is being monopolized by the top four airlines who control 80 percent of the market,” Alioto told Northern California Record.

The industry’s biggest airlines are American Airlines, Delta Air Lines, Southwest Airlines and United Airlines. Alioto said these airlines achieved their status through acquisition of smaller competitors and not because of the choice of the free market.

In addition to these four controlling the industry, new airlines aren’t able to enter the market because they can’t cover the overhead costs.

With those four airlines controlling 80 percent of the market, they were able to raise prices and lower customer service. Alaska Airline and Virgin America started showing success using a customer service-based model.

“Alaska and Virgin treated their customers civilly, they didn’t charge them an arm and a leg,” Alioto said. “Service was of top importance to them.”

Alioto went on to say while the big four decreased the number of flights, Alaska and Virgin increased the number, causing customers to leave other airlines to fly with them.

“Those two airlines had the opportunity to revitalize competition in the industry,” Alioto said.

On Aug. 4, Alaska announced that it was acquiring Virgin through a $4 million deal, making Alaska the fifth largest airline in the industry.

Alioto was hoping the Department of Justice (DOJ) Antitrust Division would step in and break of the monopoly in the industry.

It was believed these mergers violated the Sherman Antitrust Act and the Clayton Act, which say it is a crime for one company to control the marketplace and it prohibits mergers or acquisitions that will likely lessen competition. 

“It [competition] lowers prices, creates more availability, allows companies to hire more people and sparks innovation,” Alioto said.

The DOJ investigated the airline industry in 2015 but found no issue with the many acquisitions in the industry.

“The DOJ abdicated its responsibility to the people in a crucial industry,” Alioto said. “Private individuals had to do something.”

Alioto said hat private individuals have the right to fight any merger or acquisition if they feel it harms them in anyway. “This merger would eliminate a substantial choice for the people,” Alioto said.

Just days before the trial date, the judge asked the two parties to try to settle. After a day of negotiations, the plaintiffs agreed to a settlement, which is private.

The acquisition is scheduled to take place in January. Both airlines said they will continue to maintain their own identity.

Although Alioto was not able to stop the acquisition, he is still pleased that the case was able to raise awareness of the current state of the airline industry.

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