Delta/US Airways slot swap dead as carrier appeals FAA authority

Delta and US Airways have dropped plans to trade slots at LaGuardia and Washington National, saying the FAA’s conditions – making slots available by blind auction – are too high. However, the carriers are proceeding with plans to appeal the issue based on their contention that FAA does not have the authority to set such conditions.

After informing FAA of their decision, they filed in the US Circuit Court of Appeals for the District of Columbia for the court to set aside FAA’s decision.

The FAA’s initial ruling called for the airlines to relinquish slots but did not say how. Once they filed a plan for acceding to FAA demands, including the sale of slots to low-cost carrier rivals, FAA said it must be done by blind auction. FAA did not want Delta and US Airways controlling who they competed with. The action puts into question JetBlue’s build-up at Washington National since the Delta/US Airways deal got them five slots. However, it is also receiving eight slot pairs at Washington in a new marketing deal with American that would mean plans will go ahead.

See related report: Delta-US Airways slot swap approved, but FAA calls for blind sale

The two carriers requested approval for their transaction nearly a year ago, which originally had US Airways receiving 42 pairs of daily slots at Washington National in exchange for Delta obtaining 125 slot pairs at LaGuardia. Their counter-offer called for 15 slot pairs at LaGuardia and 4.5 slot pairs at National to be given to low-cost carriers, but shut out Southwest. The FAA characterised this as “insufficient to preserve competition at the two airports”.

Wall Street did not trade yesterday, due to the Fourth of July public holiday. Elsewhere, Air Canada fell 2.4%, while WestJet eased 0.7% and Jazz Air gained 0.5%.

North & South America selected airlines daily share price movements (% change): 05-Jul-2010