16-Apr-2013 3:10 PM

Sir Richard Branson laments outcome of consolidation in US aviation sector

Virgin Group chairman Sir Richard Branson stated (15-Apr-2013) "size doesn't equate to quality". He lamented "the competition authorities, in their wisdom, have allowed the six biggest airlines in America to become three giant airlines - and among the biggest in the world". He noted: "The real advantage these big airlines have is their sheer market dominance, and they often use it to get rid of their smaller rivals using questionable tactics. Virgin America is the only airline started since JetBlue in February 2000 that is still in business. They have all been driven to the wall. What's more, no other new startup airlines are in the pipeline because of the lack of investors willing to enter the current anti-competitive environment". He noted challenges with access for smaller operators, using access to Newark Airport an an example. He explained: "For five years we were told there were no slots available for us to get into the airport and operate. In fact, the incumbent airlines managed to “squat” on capacity to keep competition out of Newark alone. The Newark-San Francisco flights were only operated by one carrier - a monopoly route that had some of the highest fares in the US as a result. When American Airlines went into Chapter 11 a few slots became available. Virgin America entered the market and fares from Newark to California dropped by 40% and suddenly consumers had better options with new planes, in-flight WiFi and exemplary service. But instead of competing based on quality, United then conjured up a whole batch of previously "non-existent" slots to double their capacity on San Francisco-New York and Los Angeles-New York flights to try to squeeze Virgin America out. They have been playing this game against Virgin America by putting on extra capacity on our other routes at a massive loss to themselves. My estimate is that the extra capacity out of Newark will cost them USD130 million per year - just to try to drive us out of the marketplace". He also requested the Department of Transportation to "consider looking into what United has been up to these past couple of years and consider taking appropriate action". [more - original PR]

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