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Delta, US Airways reach new agreement on LGA, DCA slot swap

24-May-2011

Two years and two mergers later, Delta and US Airways have reached a new agreement for its proposed slot swap between LaGuardia and Washington National airports which the FAA has twice approved but with concessions that were far too costly for the two carriers.

The two airlines filed their new agreement with the Federal Aviation Administration which revises their 2009 agreement designed to help Delta expand at LaGuardia and US Airways expand at Washington National. They will also dismiss their appeal of the DOT's order regarding the original 2009 transaction that is currently pending in the US Court of Appeals in Washington. Dismissing the appeal clears the way for DOT to consider the revised application.

The new agreement should be a slam dunk at FAA given the fact that despite the immense changes in the competitive landscape wrought by both the United/Continental and Southwest/AirTran mergers, the two carriers are making available 24 slot pairs at the two airports. They pointed out the mergers “have dramatically sharpened competition on the East Coast generally and particularly in the New York and Washington regions.”

The new agreement, they said, provides an  opportunity for additional access to LaGuardia and National for new entrants and airlines with limited or no presence at the airports where the two carriers would make available 16 slot pairs at LaGuardia and eight at National. The slot concessions were designed to assuage Department of Transportation concerns about concentrating the New York and Washington markets where Delta and US Airways are already strong, respectively.

Under the agreement, Delta would acquire 132 slot pairs at LaGuardia from US Airways and US Airways would acquire from Delta 42 slot pairs at National and the rights to operate additional daily service to Sao Paulo, Brazil in 2015. The agreement also calls for Delta to pay US Airways USD66.5 million in cash.

"With this agreement, Delta will enhance competition in New York, which is already one of the most competitive aviation markets in the world, by expanding the passenger capacity at LaGuardia by as many as four million seats annually without increasing congestion," said CEO Richard Anderson. "Our expanded presence at LaGuardia will double our available destinations, offering customers more frequent and convenient service at New York's preferred airport for business travel."

Delta and US Airways pointed out the changed competitive landscape since they first proposed their slot swap which encountered far more federal push back than was experienced by the Delta/Northwest, United/Continental and Southwest/AirTran mergers. They noted that AirTran, Southwest and JetBlue have gained increased access to both LaGuardia and National in addition to Southwest’s additional access to the New York airport gained as a result of concessions made during the United/Continental merger at Newark.

"This agreement further strengthens our commitment to increase service and create more options for our customers wishing to travel to and from Washington, D.C.,” said US Airways CEO Doug Parker. “As a result of this transaction, many communities, including several smaller ones, will be able to enjoy additional nonstop service to our nation's capital."

The proposed transaction has generated significant support from elected officials and community leaders in New York and Washington, according to the two airlines. In addition, the City and State of New York and both US Senators from New York have supported the proposal, as have members of Congress representing New York, elected leaders in small communities and airports across the nation.

Delta is planning to double the number of non-stops out of LaGuardia including top business destinations not now served by either carrier. As in its original proposal, Delta said the move would also ensure economically viable service to small communities which have experienced more wholesale abandonments in the wake of the recession.

Delta will replace turboprop aircraft currently operated by US Airways with larger jets, adding as many as four million additional roundtrip seats available at LaGuardia without increasing congestion.

As part of the agreement, Delta will take control of US Airways' Terminal C to create an expanded main terminal for customers. Delta will operate a total of 18 gates in Terminal C, and add one additional gate at Delta's Terminal D, for a total of 29 gates in the two terminals. A 600-foot connector will be built to connect the two terminals. Delta also will convert the existing US Airways lounge in Terminal C to a Sky Club, while continuing to operate its current Sky Club in Terminal D.

Delta’s Boston-New York-Washington shuttle will remain at the six gates at the Marine Air Terminal. In addition, Delta will spend up to USD117 million to expand, renovate and consolidate terminals C and D over the next two years. Overall, the transaction will directly and indirectly generate an estimated 6,000 new jobs in New York, they said.

Meanwhile, US Airways' shuttle service between LaGuardia, National and Boston that is operated on dual-class mainline jets will remain unchanged as a result of the transaction. Also, US Airways will continue to offer its customers high-frequency schedules from LaGuardia to its Charlotte, N.C. and Philadelphia hubs and Pittsburgh with more than 60 daily weekday flights. All US Airways flights from LaGuardia will continue to arrive and depart from nine gates and parking positions in Terminal C and US Airways will build a new, state-of-the-art 5,000-square-foot US Airways Club.

Echoing Delta’s commitment to small community service, US Airways will do the same at National, connecting more small, medium and large communities with the nation's capital and create additional flight options throughout the airline's route network. US Airways expects to further increase its use of dual class mainline aircraft and soon to be dual class larger regional jets at National. The move will benefit customers by increasing the number of available seats between Washington and destinations without increasing congestion.

US Airways plans to add at least 15 new destinations from Washington to its network as a result of the transaction in competition with other services already in place.

Following full implementation of the new schedule, US Airways will operate approximately 230 peak-day departures at National, a 20% increase over current service levels. The airline anticipates an increase of approximately 20-25% in passenger enplanements at National as a result of the new flights and schedule improvements. However, there will be no increase in congestion at the airport owing to the reduction in Delta service as well as US Airways’ upgauging.

The expansion is consistent with US Airways' previously announced strategic plan to focus on growing its key, most profitable airports at its Washington focus city, its Phoenix, Philadelphia and Charlotte hubs and its US Airways shuttle service. Once the transition is complete, more than 99% of US Airways capacity will be to or from its key airports.

Delta will continue to operate a robust schedule at National, with nonstop service between the airport and its seven domestic hubs and select cities, according to the announcement.

US Airways will also beef up its Brazil service in 2015, as part of the deal, part of its strategic expansion into South America, the additional rights would allow it to operate two daily flights to Sao Paulo and continue its existing daily service to Rio de Janeiro, Brazil. The two dropped the Delta slot swap at Narita that was part of the original deal owing to the Japan-US Open Skies agreement enabling US Airways to launch service to Narita without the slot swap.


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