Delta and US Airways have been working on a new slot swap proposal, after the US Federal Aviation Administration tentatively approved their initial pact but called for 34 slot pairs to be made available to other carriers, a condition, the two airlines called unworkable. The Federal Aviation Administration ruling had put the deal in jeopardy.
See related report: Market dominance concerns could derail Delta/US Airways slot swap deal
But the two kept talking, ultimately making available 20 slot pairs, deciding it is better to control who gets the slots than just give up on a deal that is critical to their future strategy. FAA cited the market dominance of the two carriers in its ruling to divest the 14 slots at National and 20 at LaGuardia. The 14 slot pairs at DCA would limit US Airways’ dominance there to 50.8% of slot interests and increase the new entrant/incumbent share to 6.5%. With the 20 divested slots, Delta’s dominance would be limited to 45.3% at LGA and increase new entrant or incumbent share to 10.3%.
The latest deal not only could satisfy FAA requirements but gains the two legacies four new allies in their cause. Even so, expect an objection from Southwest, the odd many out in the new deal, which is trying to build its LaGuardia presence.
If approved, Delta and US Airways will transfer to four airlines 12% of the takeoff and landing slots at Washington National and New York LaGuardia involved in the original transaction between the two carriers. The transfers are contingent on Federal Aviation Administration approval and the closure of the original deal.
Expect an objection from Southwest which is trying to build its LaGuardia presence since it was left out of the current round of deals. But, Delta and US Airways just got four new allies in their quest to strengthen their presence at LaGuardia and Washington National, respectively. In the filing, the four urged the government to approve Delta/US Airways deal.
The new six-way deal means Delta would operate an additional 110 slot pairs (down from the original 125) at LaGuardia while AirTran, Spirit and WestJet would each get five slot pairs from Delta at LaGuardia. At Washington National, US Airways would acquire 37 slot pairs (down from the original 42), while it transfers another five slot pairs to JetBlue. Finally, US Airways would gain access to Sao Paulo and Tokyo-Narita.
In a filing yesterday, Delta said agreements have been cut with AirTran, Spirit and WestJet to transfer up to five pairs each of takeoff and landing slots at LaGuardia. In addition, US Airways agreed to transfer five pairs at Washington National to JetBlue. The two carriers said the four carriers were considered limited incumbents or new entrants by the FAA at these airports.
The two legacy carriers said they plan to add flights to a number of cities from both the New York and Washington DC markets. Delta is pledging to add or preserve service to “dozens of small- and medium-sized communities while adding service in a number of markets not now served by US Airways. It is also planning a multimillion dollar construction program at LaGuardia to connect existing Delta and US Airways terminals. The airline said it anticipates the creation of as many as 7,000 new jobs in the New York City area for construction and the addition of service.
In Washington DC, US Airways will add 15 new, daily destinations to its schedule, including eight routes that currently have no daily nonstop service to National on any airline, including all the destinations being discontinued by Delta at the airport. The airline also will significantly expand its use of larger dual-class jets by nearly 50% at National.
Delta and US Airways on 12-Aug-2009 announced their plans to transfer slots at LaGuardia and National airports. On 9-Feb-2010, the FAA granted conditional approval conditions of slot divestiture. As part of their filings today, Delta and US Airways also submitted comments challenging the legal basis for the divestiture requirement. Delta and US Airways confirmed in today's filings that they do not intend to go forward with the transaction on the conditions stated in the FAA's notice if the original transaction, as modified by today's agreement, is not approved.
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