Spirit Airlines v. Northwest Airlines

Northwest Airlines, Inc. (Northwest) (defendant) had a majority share of the market for airline passengers that flew out of Detroit. Northwest used its substantial market power to control most of the gates at the Detroit airport, creating significant barriers to new airline competitors trying to break into the Detroit market. Despite these barriers, Spirit Airlines, Inc. (Spirit) (plaintiff) obtained leases for a few gates at above-market prices and began offering no-frills, low-fare flights from Detroit to Philadelphia and Boston. These flights were designed to attract price-sensitive travelers. In order to eliminate Spirit as a competitor, Northwest slashed its prices for some seats on the same routes, offering super-low fares that were below cost. Spirit could not effectively compete against these super-low fares and eventually stopped offering both routes. After Spirit was eliminated as a competitor for these routes, Northwest increased the prices for its lowest-fare tickets on the routes to a higher amount than its original prices. Spirit sued Northwest, arguing that Northwest had engaged in predatory, below-cost pricing in the low-fare market that violated antitrust law. Northwest argued that the proper market was all passengers, not just low-fare passengers. Using this larger market, Northwest had still made a profit on its mixed-fare flights even though it had offered super-low fares to some customers. Because Northwest had made a profit on all its flights, it claimed that it had not engaged in predatory pricing. Spirit presented evidence that low-fare passengers were their own, distinct market, including evidence that Northwest’s own internal documents considered low-fare passengers to be a separate market. The district court found that there was no evidence that Northwest had engaged in predatory pricing and granted summary judgment to Northwest. Spirit appealed.