Deputy Assistant Attorney General Dina Kallay Delivers Virtual Remarks at the 2025 Chatham House Competition Policy Conference on Competition in the Airline Industry

Remarks as Prepared for Delivery, "Clearing the Runway for Unfettered Competition in the Airline Industry"

Thank you for inviting me to speak at the 2025 Chatham House Competition Policy Conference. I regret not being able to join you in person today, but I am delighted to speak to you virtually and will leave time for questions at the end of my remarks.

As the Deputy Assistant Attorney General at the Antitrust Division of the U.S. Department of Justice covering international antitrust issues, I am honored to have an opportunity to speak at an institution founded over one hundred years ago to study international affairs. Our hosts today clearly have their priorities right. Fostering an open dialogue and exchanging ideas is especially important when it comes to current competition policy. Multinational corporations engage in complex transactions that cross borders, and competition authorities in different countries often grapple with the same types of challenging issues.

I will focus my remarks today on competition in air travel. I will begin by discussing two recent airline industry matters the Antitrust Division has worked on, one domestic and one international. Then, I will offer some observations about those cases involving antitrust immunities and the enormous effect that government intervention and regulation can have on the competitive conditions in a market.

Competition in Air Travel

When President Trump came into office, he recognized that “[h]ardworking families today are overwhelmed by the cost of fuel, food, housing, automobiles, medical care, utilities, and insurance.”[1] He therefore declared that “[i]t is critical to restore purchasing power to the American family.”[2]

In line with these Administration priorities, under the leadership of Assistant Attorney General Gail Slater, the Antitrust Division of the U.S. Department of Justice has been focused on pocketbook issues that affect people’s daily lives.[3] Housing, healthcare, food, transportation, entertainment — these are markets that directly affect the cost of living. Competition in these markets is not just an abstract concept; it makes a difference in the quality of people’s daily lives and what they can afford. That is why we currently focus our resources and attention on pocketbook issues.

Transportation can be a significant part of household budgets, and in particular, air travel can be very expensive. As you may know, we will be celebrating Thanksgiving in the U.S. next Thursday. This is a major holiday where Americans travel to spend time with their families. But the rising cost of travel can make it difficult for many to get where they need to go to celebrate the holiday with loved ones.

Airline competition matters. The Sherman Act, which lays out a core part of the framework for U.S. antitrust enforcement, reflects the U.S. Congress’s view that “competition will produce not only lower prices, but also better goods and services” in the long run.[4] With respect to air travel, Congress deregulated the airline sector in 1978 with the Airline Deregulation Act, drawing a policy under which competition, not regulation, drives the industry, to the benefit of consumers.

But for decades, consolidation has mounted in the U.S. airline industry. From 1960 to 2023, today’s five biggest U.S. airlines — Alaska, American, Delta, Southwest, and United — swallowed up 42 competing companies.[5] Today, the four largest airlines — American, Delta, Southwest, and United — have taken off and control around 75 percent of U.S. domestic markets.[6]

In addition to mergers between airlines, so-called alliance agreements (or joint ventures) between airlines have also become commonplace in recent decades. Some alliances can have characteristics that are similar to those of a merger, in that they are designed to make each alliance partner indifferent as to which airline the customer chooses to fly (referred to in the industry as “metal-neutral” alliances). I’ll share with you two recent examples in which our work at the Antitrust Division has made a difference.

The first case I’d like to highlight is the Northeast Alliance case. The Northeast Alliance (NEA) was a joint venture (JV) or partnership between American Airlines and JetBlue, two of the largest airlines operating in the Northeast of the United States. The NEA was modeled after metal-neutral international alliances and included many features that were novel for a domestic partnership, like capacity coordination and revenue sharing. International alliances often operate under antitrust immunity granted by the U.S. government because features like output coordination and revenue sharing would otherwise violate the U.S. antitrust laws.

In that sense, the NEA was a test case for this unprecedented type of U.S. domestic airline alliance. In 2021, the Department of Justice, together with six states and the District of Columbia, brought suit in the District of Massachusetts to block the NEA.[7] In 2023, the district court agreed with our analysis, finding that the NEA effectively ended all competition between American and JetBlue in the Northeast region of the United States.[8] Through the use of revenue sharing and market allocation agreements, the NEA was intended to make American and JetBlue indifferent as to whether a passenger flew on one of American’s planes or one of JetBlue’s. It was a de facto merger, with the two U.S. airlines essentially acting as one in the relevant markets. The end of competition meant there would be reduced output, fewer choices for consumers, and that price and capacity decisions would be driven by joint profit maximization rather than consumer preferences.

The Antitrust Division’s successful challenge to the NEA in the district court resulted in a court order enjoining and unwinding the alliance. Last November, we successfully defended the district court’s decision on appeal in the First Circuit.[9] And earlier this year, in June, we sealed our victory when the U.S. Supreme Court rejected American Airlines’s bid to review and overturn the appellate court decision. I am proud of our Transportation, Energy, and Agriculture Section and Appellate Section’s work in developing and securing this positive result all the way up to the U.S. Supreme Court. Our victory preserved the win by the trial team that restored competition in markets affecting 32 million air travelers. And if the NEA was a test case for the question of whether the same type of output coordination and revenue sharing seen in international contexts could be imported into the domestic context, the answer was a resounding no.

The second case I’d like to discuss is an international airline alliance — a joint venture between Delta Air Lines and Aerovías de México, S.A. de C.V. (Aeromexico) in the markets between the United States and Mexico that involves coordination on prices, capacity, and operations between the airlines.

In the international context, U.S. laws limit mergers between international airlines, but U.S. laws provide for a process under which the U.S. Department of Transportation (DOT) may grant antitrust immunity to international airline alliances. As I previewed above, international alliances between airlines from different countries often include features like schedule coordination and revenue sharing that would otherwise be illegal under U.S. antitrust laws. But U.S. law gives DOT the authority to approve and grant statutory immunity to international alliance agreements if they are found to be in the public interest, which includes a consideration of competitive impact.[10] Accordingly, as part of its review, DOT conducts a competitive effects analysis. An agreement that substantially reduces or eliminates competition must be disapproved, unless the DOT makes a determination that the agreement is necessary to meet a serious transportation need or achieve important public benefits that cannot be achieved by reasonably available alternatives that are materially less anticompetitive. This may include, for example, competitive access to a key international airport such as Mexico City International Airport, which regionally connects flights.

In September 2025, the DOT issued a final order terminating its prior approval of the Delta/Aeromexico JV, along with the associated grant of antitrust immunity.[11] The JV had previously received approval and was granted antitrust immunity in 2016, subject to certain conditions.[12] During that review, DOT had a number of significant competitive concerns, including the concentration at the Mexico City International Airport and anticompetitive practices in how the Mexican government administered the allocation of slots — that is, authorized take-off and landing times — at the Mexico City International Airport.[13] Thus, DOT had approved the JV with conditions, including the divestiture of certain slots.[14]

When Delta and Aeromexico filed a new application with DOT, the Department of Justice received notice and filed comments in the proceeding to support DOT’s decision to withdraw the grant of antitrust immunity.[15] While I can’t comment extensively given ongoing litigation in this matter, our comment explained that antitrust immunity should be narrowly construed and carefully considered, particularly in light of the public benefit standard Congress provided to the DOT, which emphasizes the critical importance of competition to air transportation.[16] The comment reiterated that the grant of antitrust immunity must be built on a competitive analysis, including a need to “plac[e] maximum reliance on competitive market forces and on actual and potential competition.”[17]

In particular, DOT had found that the Government of Mexico had “continue[d] along a path of market intervention and distortion” that harmed competition in the markets, including at the Mexico City International Airport, confiscating slots, prohibiting all-cargo operations, and continuing a slot allocation system that advantages Aeromexico, a Mexican airline.[18] DOJ’s comments noted that “[t]he record evidence suggests that restrictive and potentially discriminatory practices by the Government of Mexico . . . have limited entry and expansion by certain carriers at [Mexico City International Airport] and thereby undermined competitive conditions in Mexico.”[19] We explained that market access is integral to competition, and that whether entry or expansion by rivals can fill in to mitigate the anticompetitive harm is a key part of the relevant considerations for antitrust immunity.[20]

DOT’s final order declining to extend antitrust immunity for the Delta/Aeromexico JV was appropriate in light of the changed circumstances and the competitive analysis, which took into account relevant factors including regulatory factors.

Competitive Effects of Government Intervention and Regulatory Action

There are two observations I’d like to make based on the two examples of airline industry alliance agreements that I’ve described.

First, antitrust immunities should be limited and construed narrowly, both as a matter of U.S. legal doctrine and as a matter of antitrust policy. As a legal matter, the U.S. Supreme Court has emphasized that immunities and exemptions from the antitrust laws are disfavored.[21] Because U.S. antitrust laws embody the fundamental national policy in favor of competition, the strong presumption is that the antitrust laws apply across the board.[22] Exemptions distort competition and strip consumers of the protection of competition laws. The Antitrust Modernization Commission in 2007, after a comprehensive review of U.S. antitrust laws, echoed that “[c]ourts should construe all immunities and exemptions from the antitrust laws narrowly.”[23] The Commission noted that “consumers (as well as non-exempted firms) and the U.S. economy generally bear the harm from the loss of competitive forces.”[24]

As a practical matter, immunities and exemptions should be limited because competitive conditions can change, as the Delta/Aeromexico example illustrates. Antitrust immunities or exemptions that may have been deemed appropriate at one time may become outdated or unjustified based on changed market conditions, changed behavior, or even new economic understanding. But once exemptions are extended, the benefits of an unfettered, competitive market are lost, and companies “may take anticompetitive actions with impunity.”[25] In 2018, under the first Trump Administration, the Antitrust Division hosted a public roundtable regarding antitrust exemptions and immunities.[26] The discussion from that roundtable “reflected a general consensus that Congress should not enact future antitrust exemptions or immunities and also should explore actively studying, sunsetting, or eliminating current statutory exemptions and immunities.”[27]

Even in cases where the anticompetitive conduct does not change, the environment around the conduct can change in a manner that alters the competitive analysis. That brings me to my second observation: regulations and government intervention can make a significant, and pivotal, difference in the competitive landscape and analysis. In many industries, including the airline industry, there is a regulatory overlay that directly affects how firms in that industry compete. Even in less heavily regulated industries, any number of government actions may change the competitive dynamics by affecting access to inputs, barriers to entry, or some other mechanism.

As Assistant Attorney General Gail Slater has emphasized, the American free market system does not support centralized market planning or the promotion of national champion monopolists.[28] The free market decides, not the government. Consistent with this, longstanding U.S. policy is that international air transportation markets should also be free and unregulated — including providing non-discriminatory treatment for U.S. airlines.[29]

But in the international context, the prospect of a non-U.S. government’s regulatory action to disrupt free competition and preference its own national companies can have serious consequences. In the Delta/Aeromexico example, the Department of Justice’s comment noted that “a foreign national regulatory authority with control over critical airport infrastructure may have an incentive to preference foreign national carriers (or an alliance that includes such a carrier) over American air carriers that are not part of immunized alliance.”[30]

Of course, these concerns can arise by other forms of regulation as well. For example, the European Commission’s Directorate-General for Competition’s recent comfort letter to the EU automotive sector regarding Automotive Licensing Negotiation Group seems to have permitted collusive licensing negotiation groups, which constitute illegal buyers’ cartels under U.S. antitrust law.[31]

Aside from the damage to the free market, one problem with these government regulations and interventions is that they may have “butterfly effects” beyond the specific intervention. The existence of antitrust immunities and exemptions may incentivize companies to seek such carve-outs rather than comply with the antitrust laws. And the existence of immunized conduct may have negative anchoring effects. For example, the Northeast Alliance was modeled after immunized international airline alliances, even though no such immunity was available under U.S. law domestically. Regulatory market interventions are sticky, and their application to reduce and inhibit barriers to entry and expansion may have ripple effects on competition that are not easily reversed afterwards.

At the Antitrust Division, we have therefore been wary of the nexus between regulations and anticompetitive barriers, regardless of whether at home or abroad. Earlier this year, President Trump issued an Executive Order that made it clear that “[f]ederal regulations should not predetermine economic winners and losers.”[32] Rather, “[r]egulations that reduce competition, entrepreneurship, and innovation — as well as the benefits they create for American consumers — should be eliminated” in order to “revitalize the American economy.”[33]

Along with the U.S. Federal Trade Commission, the Antitrust Division led a government-wide effort to identify and modify or rescind anticompetitive regulations across sectors. We sought comments in a public inquiry,[34] and our Anticompetitive Regulations Task Force worked with agencies across the U.S. government to review and analyze the competitive effects of government regulations, including in the airline industry.[35]

Conclusion

We at the Antitrust Division are runway-ready to continue to take action to promote competition, focusing our resources on pocketbook issues and industries that directly affect consumers’ daily lives, including the airline industry. At the same time, we will work to curtail anticompetitive regulations and unwarranted government interventions that weaken competition in the marketplace.

Notably, the topics I touched on today are not unique to U.S. markets. We trust our fellow travelers in competition agencies outside the United States, including the U.K. Competition and Markets Authority, will join us in focusing efforts on pocketbook issues, as well as in narrowing antitrust immunities and reducing anticompetitive regulations. I understand that the U.K. Government’s Regulation Action Plan already outlines plans to re-energize the regulatory system to support a growth agenda that will support innovation, increase productivity, and support economic growth. We wish you a smooth and successful ride — consumers worldwide stand to benefit from this type of work.

Thank you.