Spirit doesn''t move NWA
BY MARTIN J. MOYLAN
Pioneer Press
Northwest Airlines has won a lawsuit in which Spirit Airlines accused it of using predatory pricing practices to drive Spirit from serving routes connecting Detroit to Philadelphia and Boston.
Spirit, a Florida-based low-fare, no-frills carriers, sued Northwest in federal court in Detroit in March 2000.
It accused the much larger Northwest of devising a cleverly crafted, avaricious scheme that forced Spirit to abandon the routes in 1996. Spirit alleged that Eagan-based Northwest cut its fares to below-cost levels and flooded those routes with new flights after Spirit introduced discount fares.
Northwest contended that its pricing was not predatory because it simply matched the fares of a rival. But that argument is not what swayed U.S. District Court Judge Gerald Rosen to rule in NWA''s favor.
The decisive factor was that Northwest did not price its fares below its costs on the routes, he indicated.
The sole and objective benchmark is whether the alleged predator''s prices exceed its costs. … Rosen wrote in his decision. Under this standard, the record compels the conclusion that Northwest''s prices were not predatory, because the airline operated profitably on both the Detroit-Boston and Detroit-Philadelphia routes during the entire period of alleged predation.
When Spirit started service from Detroit to Philadelphia in December 1995, its lowest fare one-way was $49, with no advance purchase or minimum stay. Its average fare, excluding travel agent commissions, was between $57 and $73.
Meanwhile, NWA''s lowest unrestricted one-way fare was $355 and its lowest restricted fare $75. Its average one-way fare was $168.
In June, as Spirit expanded its Detroit-Philadelphia service, Northwest matched Spirit''s $49 one-way fare. NWA''s average one-way fare from Detroit to Philadelphia fell to about $77. Northwest also added flights.
Northwest''s moves killed Spirit''s bookings. The percentage of seats filled on Spirit''s planes flying between Detroit and Philadelphia fell from 87 percent in May to 43 percent in July. Spirit dropped the route in September.
By November, NWA''s fares on the route had returned to their pre-Spirit levels, with one-way fares averaging $152. The lowest restricted fare was $149. By Feb. 1997, NWA''s average fare on the route reached $268.
Northwest would not comment on the judgment. Spirit officials did not respond to a request for comment.
In a recorded message to employees, CEO Richard Anderson referred to the decision as a big legal victory.
Northwest shares closed up 10 cents, at $6.71 Wednesday.
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BY MARTIN J. MOYLAN
Pioneer Press
Northwest Airlines has won a lawsuit in which Spirit Airlines accused it of using predatory pricing practices to drive Spirit from serving routes connecting Detroit to Philadelphia and Boston.
Spirit, a Florida-based low-fare, no-frills carriers, sued Northwest in federal court in Detroit in March 2000.
It accused the much larger Northwest of devising a cleverly crafted, avaricious scheme that forced Spirit to abandon the routes in 1996. Spirit alleged that Eagan-based Northwest cut its fares to below-cost levels and flooded those routes with new flights after Spirit introduced discount fares.
Northwest contended that its pricing was not predatory because it simply matched the fares of a rival. But that argument is not what swayed U.S. District Court Judge Gerald Rosen to rule in NWA''s favor.
The decisive factor was that Northwest did not price its fares below its costs on the routes, he indicated.
The sole and objective benchmark is whether the alleged predator''s prices exceed its costs. … Rosen wrote in his decision. Under this standard, the record compels the conclusion that Northwest''s prices were not predatory, because the airline operated profitably on both the Detroit-Boston and Detroit-Philadelphia routes during the entire period of alleged predation.
When Spirit started service from Detroit to Philadelphia in December 1995, its lowest fare one-way was $49, with no advance purchase or minimum stay. Its average fare, excluding travel agent commissions, was between $57 and $73.
Meanwhile, NWA''s lowest unrestricted one-way fare was $355 and its lowest restricted fare $75. Its average one-way fare was $168.
In June, as Spirit expanded its Detroit-Philadelphia service, Northwest matched Spirit''s $49 one-way fare. NWA''s average one-way fare from Detroit to Philadelphia fell to about $77. Northwest also added flights.
Northwest''s moves killed Spirit''s bookings. The percentage of seats filled on Spirit''s planes flying between Detroit and Philadelphia fell from 87 percent in May to 43 percent in July. Spirit dropped the route in September.
By November, NWA''s fares on the route had returned to their pre-Spirit levels, with one-way fares averaging $152. The lowest restricted fare was $149. By Feb. 1997, NWA''s average fare on the route reached $268.
Northwest would not comment on the judgment. Spirit officials did not respond to a request for comment.
In a recorded message to employees, CEO Richard Anderson referred to the decision as a big legal victory.
Northwest shares closed up 10 cents, at $6.71 Wednesday.
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