The U.S. Department of Transportation is proposing to allow Delta Air Lines and US Airways to exchange some of their operating rights at Reagan Washington National Airport and New York LaGuardia Airport, subject to a number of conditions.
The Department of Transportation (DOT) is asking for public comment on its proposal to allow Delta Air Lines and US Airways to exchange take-off and landing rights at the two airports.
Approval of the transaction is subject to a number of conditions designed to protect consumers. Principally, the DOT is requiring that the carriers divest themselves of eight pairs of daily slots at Reagan National and 16 pairs at LaGuardia, and that they complete the transaction in phases.
In DOT parlance, an airport “slot” refers to an airline’s authority to take off or land at an airport where flight operations are limited by the Federal Aviation Administration. Both conditions are being proposed in order to promote competition at the airports, according to the DOT.
“Delta Air Lines and US Airways welcome the decision by the Department of Transportation to tentatively approve the proposed slot transaction at New York-LaGuardia and Washington-Reagan National airports,” the two airlines say in a joint statement. “Upon final approval we intend to move forward with the plan, as conditioned by the department, which will enhance competition and allow the airlines to improve service, consumer choice, modernize facilities and create jobs at both airports.”
In 2009, the two carriers requested approval for a similar slot-swap transaction at the two airports. However, the DOT said it would allow the swap only on the condition that the carriers divest themselves of 14 pairs of daily slots at Reagan National and 20 pairs at LaGuardia, in order to reduce the impact on competition and provide more opportunities for new-entrant carriers at the airports.
Delta and US Airways did not proceed with that transaction. Instead, they submitted a revised proposal to the DOT on May 23, 2011. This proposal included Delta’s transferring 42 slot pairs at Reagan National for 132 US Airways slot pairs at LaGuardia. The carriers offered to divest some slots as an alternative to their argument that no divestiture should be required.
In tentatively approving the new proposal, the DOT has noted that recent events have resulted in an increased presence of low-cost carriers at the two airports, but that divesting slots to new entrants or low-cost carriers would still be necessary to reduce the prospects for competitive harm.
The DOT also found that other potential benefits could arise from the swap, such as enhanced service benefits to passengers and a more efficient use of slots at the airports.
If the DOT’s July 21 decision is made final, the carriers would be required to sell eight slot pairs at Reagan National and 16 slot pairs at LaGuardia through a blind sale to airlines which currently have little or no service at these airports. Slot pairs would be sold in bundles large enough to ensure that a purchaser would have a sufficient number of slots to provide meaningful new competition.
In addition, Delta and US Airways would be required to wait 90 days before beginning their new operations on a phased-in basis, in order to allow the new services to establish a foothold at the airports.
Comments on the DOT’s proposed decision are due in 30 days from July 21. The proposed decision, public comment and other documents in the case can be found on the Internet at www.regulations.gov/search/Regs/home.html#docketDetail?R=FAA-2010-0109.
Under Delta’s proposed slot-swap deal with US Airways, Delta would acquire 132 slot pairs at LaGuardia from US Airways and US Airways would acquire from Delta 42 slot pairs at Reagan National and the rights to operate additional daily service to Sao Paulo in Brazil in 2015. Delta would also pay US Airways $66.5 million in cash.
As previously noted, the deal tentatively approved by the DOT also includes the divesting 16 slot pairs at LaGuardia and eight slot pairs at Reagan National to airlines with limited or no service at those airports.