On August 12th, 2009, US Airways and Delta Airlines filed with the Department of Justice and Department of Transportation to allow a sale/ trade of slots at Washington's Reagan National Airport, and New York La Guardia airport. The proposed sale would result in Delta Airlines gaining 125 slot pairs at La Guardia and US Airways' terminal, and US Airways getting an additional 42 slot pairs at Reagan and slots/access to Tokyo and Sau Paulo.
taken from: http://urawa.cool.ne.jp/serippe/DeltaAirLines/Delta001.shtml
The DOT initially gave its approval, but attached untenable conditions to the approval. US Airways would have been required to sell off 20 of the slots at La Guardia to other airlines, or 16% of the initial total. Delta would have been required to give up 14 slots at Reagan, or a full third of the slots. The slots would have been required to be sold to airlines with less than a 5% market share at the airport. The majority of airlines that fit that bill, are not traditional service carriers, i.e. low cost carriers.
taken from http://www.msnbc.msn.com/id/21837295/
Delta and US Airways rejected the idea, pulling back the proposed deal. US Airways President Scott Kirby said in a letter to his employees, "At this point, while we are still analyzing the DOT's proposed ruling, we expect that if the DOT's order is implemented as proposed (there is a 30-day public comment period before the ruling becomes final) the transaction will not go forward."
taken from http://didntyouhear.com/delta-is-giving-their-planes-new-colors
I initially believed that the deal should have gone through . The deal would allow for a broader range of markets to be served from the two airports, and increases in capacity due to cost benefits achieved via larger operations. It also allowed US Airways to more effectively cater to its larger frequent flyer base in DC, and Delta to do the same for its base in New York. But the conditions attached made the deal obsolete. Did the DOT really expect US Airways to give up a third of its gained slots to airlines that would have most likely compete directly against them??
But yesterday, the airlines came out with a new proposal. And this time, some of the airlines that fought against the slot deal are on board. Under the new proposal, Delta Airlines will give 5 slot pairs each to Air Tran Airways, Spirit Airlines, and Canadian LCC WestJet would gain access to La Guardia, giving low-cost carriers their first significant shot at the New York City market. At Reagan, JetBlue would get 5 of the initially proposed slot pairs, leaving US Airways with 37. They would still also get access to Sau Paulo and Tokyo. Though in the case of JetBlue, the new slots could serve to cannibalize their existing operation at Washington Dulles International Airport.
By getting the other carriers to jointly file the proposal with them, Delta and US Airways have removed a significant pitfall. And Delta has also given assurances that it will not drop routes currently only served by US Airways, and even increase their capacity. Delta also points to the benefits provided by the trade. In an internal company memo, Delta's senior vice-president of New York operations had the following to say, "As we announced last fall, the additional slots we aim to acquire at LaGuardia would enable us to significantly expand our operation by increasing the number of customers served at each takeoff and landing slot, allow more passengers to travel through New York's preferred airport each year
and preserve or expand service for customers in small- and medium-sized communities throughout New York and the Northeast. Also, upon receiving government approval, we would immediately begin a multimillion dollar construction program at LaGuardia to connect the existing Delta and US Airways terminals and enhance the airport experience for customers. In total, we estimate that the proposed Delta-US Airways transaction will generate as many as
7,000 new jobs in the New York City area, driven by the construction of new facilities and the addition of service."
taken from delta.com
And US Airways will probably achieve similar results in Washington. Whatever negative benefit this has in fares, will be regained through increased capacity, and more effective scheduling. With the proposed slot takeover, Delta would solidify the only true hub at La Guardia, and US Airways could flow passengers through Reagan National.
taken from usairways.com
However, not everybody is happy about the trade. The world's largest low-cost-carrier, Southwest Airlines filed a quick response to the new deal with the DOT, stating that the slots should be divested in an auction to the highest bidder. Southwest Airlines was among the airlines designated as a new entrant for divestiture in the DOT's original response. Since Southwest Airlines has the most cash among LCCs it would stand to reason that they would sweep up all the slots. Therefore, keeping Southwest out of LGA and DCA protects the airlines' pricing power. Southwest Airlines currently has service to Denver, Baltimore-Washington, and Chicago-Midway from La Guardia. A Delta Airlines spokesperson said that his airline would not publicly comment on Southwest's response, but did provide the aforementioned memo. Southwest Airlines' press department could not be reached for comment. Another potential pitfall, is that WestJet, as a Canadian carrier, may not satisfy the demands of the DOT for increased competition.
Current LCCs at La Guardia are: Air Tran, Frontier, Jet Blue, Southwest, and Spirit. At Reagan National, only Air Tran, Spirit, and Frontier currently hold slots.
All the airports in the New York Area, and Reagan near DC have limited capacity to expand, and cannot legally build anymore runways. The inability to add runways, coupled with high demand have led to the creation of slots to regulate traffic. Each slot pair allows one flight to take off and one flight to land.
La Guardia and Reagan, which are the closest airports to their respective city centers, are popular with business travelers for that exact reason. Large premium demand leads to higher average fares from the airport. Both airports also have perimeter rules, restricting the airports that can be served from there.
The DOT is expected to rule on this new proposal soon. Let's hope they get it done quickly, unlike the Haneda slot allocation (which I blogged about at http://aviationlover-vin2.blogspot.com/2010/03/who-exactly-should-get-slots-to-haneda.html). That was supposed to be answered by March 1st, which obviously hasn't happened…
Other articles about:
http://iagblog.blogspot.com/2010/03/great-slot-transfer-is-on.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+blogspot/tAHS+(IAGblog+feed)
http://www.usatoday.com/money/industries/travel/2010-03-22-delta-usairways-slots-swaps_N.htm