Things in the Sky

Remember the slot swap that Delta and US Airways announced in August? The deal involved Delta giving US Airways 42 slots at Reagan National, as well as rights to fly to Tokyo and Sao Paulo in exchange for 125 LaGuardia slots from US Airways.

I thought it was a creative move by both carriers to help them build up more-profitable hubs. Plus, US Airways would be able to expand its international reach. And I thought it was good for consumers, too, from some perspectives. LaGuardia passengers could get Delta RJs instead of US Airways Dash-8s. Plus, US airways could expand its reach in Washington, providing nonstop service to some new markets.

Photo Credit: US Airways.

Well, the DOT tentatively approved the deal yesterday, but with concessions. Such as decision was made because the DOT fears that the deal would cause “a substantial increase in market concentration that would harm consumers.” So, the government is proposing a compromise – the carriers must sell some slots for the deal to go through – 14 and Reagan and 20 at LaGuardia. Naturally, the carriers don’t like it. In a joint statement, US Airways and Delta said that “we expect that if this order is implemented as proposed the transaction will not go forward.” And I completely understand their reasoning. The deal involves a loss of a third of the slots over at Reagan – that’s a big blow to US Airways, for sure. Plus, the prospect of extra competition isn’t great, either. According to the proposed compromise, the slots need to go to a carrier who does not serve the airport, or one that already does, but has less than 5% of the airport’s total slots (DCA and LGA will be treated separately).

The existing carriers that qualify for Reagan are Spirit and AirTran. For LaGuardia, it’s Spirit, AirTran, JetBlue, and Southwest. Most likely, an LCC would pick up the slots, which would bring down fares in some markets – and that’s exactly what the DOT is looking for. But on the other hand, the DOT has said that one factor here is service to small communities, and if this compromise goes through, it’s those communities that will be hurt. LCCs will use those slots for larger markets.

But, let’s assume the deal goes through as the DOT says it will. I have to think Southwest is salivating over this one. The airline has said it would consider growing at LaGuradia if the opportunity presented itself. And I think it would be interested in going to Reagan as well. Yes, Southwest has a huge operation in Baltimore, but that’s not all convenient for those downtown (to me, it’s similar to the case for Boston: PVD/MHT were not good enough for getting passengers from downtown). Southwest could do what it’s done in Dulles – a small operation, but it adds a dot to the route map and can open up connecting opportunities.

Anyway, we’ll see how this one plays out.