AA merger issues aside, US Airways can't win Sabre lawsuit

By Mark Pestronk
Mark PestronkQ: Why is US Airways' antitrust suit against Sabre continuing when American, which settled its case against Sabre more than a year ago, has absorbed that carrier? Shouldn't the judge have dismissed it due to the merger? Also, I read in Travel Weekly's sister publication, The Beat, that, at a court status conference last month, Sabre's attorney made the startling statement that US Airways pays Sabre nothing for about 50% of agency bookings made using Sabre. Instead, the parties use a so-called wholesale model under which some agencies presumably pay Sabre, instead of vice versa. Doesn't this remarkable percentage, which has never been revealed before, totally undermine US Airways' claims that Sabre is abusing its market power by forcing carriers to pay excessively high booking fees?

A:
The issue of whether the merger totally or even partially moots US Airways' New York antitrust case is quite a difficult one, as the parties' court filings show. Even if the case is not dismissed because of the merger, it is now clearer than ever that US Airways cannot prevail because its case has absolutely no merit.

Sabre notes that, as a matter of corporate law, US Airways has become a subsidiary of American Airlines Group, which is the new name for AMR, which was the party in the Texas antitrust case settlement. The Texas settlement agreement, a copy of which can be found in the American bankruptcy case docket, states that the releases of claims "are binding upon ... the subsidiaries ... and any entity that merges or consolidates with ... American ... in the [bankruptcy] case ... or at any time thereafter."

On the other hand, US Airways notes that the Texas settlement applies only to claims that "could have been asserted in the actions," and since US Airways' own claims could not have been asserted in a case in which it was not even a party, the release does not apply to it. The carrier further states that the general law of releases is that they apply only to matters that the parties intended to dispose of, and American and Sabre did not intend to dispose of US Airways' case, by definition.

The judge in the New York case may never need to decide the release question. If US Airways cannot make an initial showing that will prevail, the court may not need to rule on Sabre's defenses.

The essence of US Airways' case is that, to paraphrase the man who ran a humorous campaign for governor of New York, the booking fees are too damn high. The carrier alleges that Sabre's anti-competitive behavior results in various ill effects, but it is clear that, above all, US Airways detests the fact that it must pay an indirect incentive to agencies.

Paragraph 148 of US Airways' complaint gets to the heart of the matter: "Sabre's ability to keep its booking fees high over an extended period while the cost of many of its inputs -- e.g., computing technology -- has spiraled severely downward over that period is direct evidence of the ability to act as a price maker, rather than a price taker -- i.e., direct evidence of monopoly power."

Having achieved an effective 50% discount on all fees, which belies Sabre's "ability to keep its booking fees high," it is hard to see how US Airways has anything to complain about.

Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at mark@pestronk.com. 
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