Continental Airlines, Inc. v. United Air Lines

• Decision Date: 05 January 2001
• Docket Number: No. CIV. A. 00-684-A.,CIV. A. 00-684-A.
• Citation: 126 F.Supp.2d 962
• Parties: CONTINENTAL AIRLINES, INC., and Continental Express, Inc., Plaintiffs, v. UNITED AIR LINES, INC., and Dulles Airport Airline Management Council, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

126 F.Supp.2d 962

CONTINENTAL AIRLINES, INC., and Continental Express, Inc., Plaintiffs, v. UNITED AIR LINES, INC., and Dulles Airport Airline Management Council, Defendants.

No. CIV. A. 00-684-A.

United States District Court, E.D. Virginia, Alexandria Division.

January 5, 2001.

COPYRIGHT MATERIAL OMITTED

Vanessa Y. Chandler, Vinson & Elkins, Washington, DC, for Plaintiffs.

Andrew Abbott Nicely, Robert Lawrence Bronston, Mayer, Brown & Platt, Washington, DC, for Defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

Cross-motions for summary judgment in this private federal antitrust suit present the question whether an agreement by defendants United Air Lines, Inc. ("United"), and the Dulles Airport Airline Management Council ("AMC") to restrict the size of carry-on bags at Washington Dulles International Airport ("Dulles") is unreasonable under Section 1 of the Sherman Act, 15 U.S.C. § 1.

I.¹

The dramatis personae for this dispute include, among others, two airlines familiar to any airline traveler. Plaintiffs Continental Airlines, Inc., and its wholly owned subsidiary, Continental Express, Inc. (collectively, "Continental"), are well-known air carriers that transport passengers, baggage, and cargo domestically and internationally. Continental operates at many major airports across the country and internationally, including Dulles, where it currently uses only one of the 120 terminal gates there in service. Equally well-known is defendant United, which is the largest carrier at Dulles, where it currently uses 38 of the 120 gates. Not so well-known is defendant AMC, an unincorporated association of carriers serving Dulles. The Federal Aviation Administration ("FAA") requires air carriers at every airport to form such associations to consider and resolve airport operational, security, and facility issues that affect more than one carrier. The AMC currently has 29 members, including both Continental and United, Air Canada, Air Tran, All Nippon Airways, Atlantic Coast Airways, British Airways, BWIA, Delta Airlines, Korean Air, Lufthansa, Sabena, Spanair, Swissair, TACA, and TWA, among other air carriers. AMC meetings are held monthly at Dulles. Also in attendance at these meetings are representatives of the Metropolitan Washington Airports Authority ("MWAA"), a public body created by agreement between the District of Columbia and the Commonwealth of Virginia. MWAA serves as the airport landlord and oversees the facilities at both Dulles and Washington Reagan National Airport ("National").

At Dulles, like at many other major airports, passengers must pass through common security checkpoints in the main terminal before proceeding to a departure gate. Dulles has two such security checkpoints, the East checkpoint, through which most of United's passengers pass, and the West checkpoint, through which most of Continental's passengers pass. Both checkpoints lead to one common "sterile" area, where passengers board shuttles, or "mobile lounges," that take them to midfield concourses where the individual gates are located. On average, approximately 65,000 people pass daily through Dulles's two security checkpoints.

The instant dispute arose in March and April of this year, when, over Continental's objections, defendants agreed to restrict the size of carry-on baggage for all airlines. To implement this agreement, defendants installed carry-on baggage "templates" at both security checkpoints at Dulles. These templates are stainless steel or plastic molds that fit over the opening of an x-ray machine conveyor belt and are sized and shaped to permit only bags that are about ten inches high and fifteen inches wide to pass through the x-ray machine. Passengers whose bags are too large to pass through the template must check such bags — presumably at the main ticket counter — before proceeding through the security checkpoint en route to a departure gate. Because all passengers departing from Dulles must pass through one of the two security checkpoints to reach their departure gates, the installation of the templates effectively restricts the size of carry-on bags for the passengers of all carriers at Dulles, including Continental.

Given that the focus of this case is the defendants' agreement to restrict the size of carry-on bags at Dulles, it is important to understand the facts and circumstances that led to the agreement's adoption and implementation. These facts and circumstances, gleaned from the extensive summary judgment record, paint a picture that helps illuminate the antitrust analysis. The appropriate starting point in painting this picture is recognition of the fact that many airline passengers, particularly business travelers, prefer to avoid checking baggage and, instead, to carry their bags onto the aircraft. The reasons for this preference include (i) the time and inconvenience involved in checking baggage at ticket counters and retrieving baggage at airport baggage claim areas, (ii) the risk of loss, damage, or delay associated with checking baggage, and (iii) the convenience of having access to carry-on bags during the flight. Naturally, therefore, many passengers prefer to fly on airlines that cater to the preference for carry-on baggage.² Airlines,³ for their part, generally respond to this demand and compete with each other on the basis of carry-on baggage capacity and policy, in addition to price, schedule, and service. Indeed, the FAA recognizes that "[s]ome carriers have made carry-on baggage a selling point, thereby pressuring their competition to do the same," and encourages air carriers to formulate individual carry-on baggage policies and practices "to provide passengers ... the services they want while meeting the safety requirement for proper baggage stowage of all bags." Carry on Baggage Program, 52 Fed.Reg. 21,472, 21,472, 21,474 (1987).

In the 1990s, a healthy economy, among other causes, contributed to a significant increase in air travel so that by the middle of the decade, many aircraft did not have sufficient under-seat or overhead bin storage space to stow securely the number and size of bags brought onboard by the increasing number of passengers. The competitive market compelled carriers, including Continental and United, to address this issue. In this regard, United, for example, experimented with a program called "Take-Off Fares" at Des Moines International Airport that conditioned the purchase of low-fare tickets on restrictions that included a limit of one carry-on bag per passenger. One of the program's goals was to determine whether carry-on storage space that otherwise would be provided to low-fare — or "low-yield" — passengers could feasibly be reallocated to high-yield passengers by imposing carry-on baggage restrictions on low-yield passengers in exchange for discounted fares. In the end, United deemed the experiment a failure after its internal analysis concluded that any potential benefit to be derived from the reallocation of resources to high-yield passengers⁴ fell far short of outweighing potentially significant low-yield market share loss attributable to passengers switching to competitor airlines that did not adopt similarly restrictive programs.⁵ United decided, therefore, that "in the competitive environment in which we operate everyday, that was simply a policy that we could not maintain."⁶

Other airlines responded differently. Some explored the feasibility of installing carry-on baggage "templates" at airports to screen "oversized" bags. In 1997, for instance, Continental experimented with such a template at its hub at Houston's George Bush Intercontinental Airport. Analysis of the customer feedback showed that the template irritated customers. Continental therefore rejected templates as a solution to the increasing demand for greater carry-on baggage capacity and "passenger-friendly" carry-on baggage policies. Instead, Continental chose to increase aircraft carry-on storage capacity and to relax its carry-on baggage policy. Specifically, Continental chose to retrofit its entire fleet of 41 Boeing 757-200, 65 Boeing 737-300, and 66 Boeing 737-500 aircraft, in addition to 16 of its McDonnell Douglas MD-80 aircraft, with larger overhead bins at a cost of approximately $12.4 million. Continental also purchased new Boeing 737-700, 737-800, 767, and 777 aircraft with larger overhead bins. It then aggressively promoted this bin-expansion program in advertisements, billboards, press releases, and sales calls on customers. In addition, Continental adopted a flexible carry-on baggage policy that, in practice, had two components. First, Continental eschewed rigid and inflexible limitations on the size and number of bags its passengers were allowed to carry onto the aircraft; instead, it vested discretion on gate personnel to determine how many and what size bags passengers would be allowed to carry onboard given the "load factor," or percentage of seats filled, and other circumstances of a particular flight.⁷ Thus, Continental passengers could carry onboard larger bags, and more of them, on flights with lower load factors. On flights with higher load factors, passengers were limited to two reasonably sized carry-on bags and therefore were asked to check other bags at the gate. To facilitate this gate-checking process, Continental installed (i) bag slides to deliver bags from the jetway to the ramp, and (ii) bag ticket printers at gates for gate-checking purposes. It also invested in more manpower and equipment to improve baggage handling at several airports. Second, although Continental Express aircraft have less carry-on storage space in the main passenger compartment than do other modified Continental aircraft, passengers of the Express service can check and retrieve their bags at planeside, thereby eliminating the need to check bags at ticket counters and retrieve them at baggage claim.

Continental's carry-on baggage policies and practices have received...