Monday, March 22, 2010

Delta, US Airways revise offer for 'slot' swaps at D.C., N.Y. airports

By Dan Reed, USA TODAY

Delta Air Lines and US Airways made the Federal Aviation Administration a counteroffer Monday in hopes of getting approval for their blockbuster swap of assets at New York's LaGuardia and Washington, D.C.'s Reagan National airports.

But the two carriers' offer falls short of the demands made last month by FAA officials. The FAA has jurisdiction over the assets swap because it involves transferring ownership of "slots," which are time-specific landing and take off rights, at two of the USA's most congested airports. Only a handful of U.S. airports are slot-limited.

The FAA last month told Delta it had to divest 20 of the 125 LaGuardia slot pairs it would obtain from US Airways. On Monday Delta said it has deals to sell 15 slot pairs, 5 each to AirTran, Spirit and Canada's WestJet airlines.

Meanwhile US Airways said it has a deal to sell 5 pairs of Reagan National slots to JetBlue. The FAA ruled last month that it needed to divest 14 of the 42 Reagan National slot pairs it would receive from Delta.

Each plane service at LaGuardia and Reagan National needs a pair of slots: one for landing, and one for taking off.

Furthermore, Delta and US Airways said that they will drop their unprecedented assets swap deal if the FAA does not now approve that deal as revised by the slot divestitures announced Monday.

In August, Delta and US Airways announced a deal that they said would greatly enhance Delta's market presence at LaGuardia and US Airways' presence at Reagan National. They also compete head-to-head in the so-called shuttle market that features hourly, and sometimes half-hourly flights on specialized jets in the heavily traveled Washington-New York-Boston corridor.

Both carriers say they will continue to compete against each other in the shuttle corridor with no changes. But if their assets swap deal is approved, Delta would drop almost all of its non-shuttle service at Reagan National. Likewise, US Airways plans to sharply reduce its non-shuttle flights to and from LaGuardia.

The two carriers also would swap terminal facilities at LaGuardia. US Airways would move its New York shuttle operations to the old Marine terminal at LaGuardia now used by Delta's shuttle. Delta would get US Airways' larger, newer LaGuardia main terminal, which Delta would connect to its smaller main terminal next door at LaGuardia.

The assets swap deal is supposed to allow both carriers to focus their investment and efforts more intently on one market each rather than spread their assets and efforts out over both airports.

US Airways, the nation's sixth-largest airline, long has been the market leader at Reagan National. Picking up more slots there from Delta would strengthen that position. Meanwhile, except for its continuing shuttle operation, US Airways would shrink to a handful of flights a day at LaGuardia, where in recent years it had become second-tier competitor and faces growing low fare competition.

Other than its shuttle operation, Delta has been a second-tier carrier at both Reagan National and LaGuardia. However, it has a large operation at New York's John F. Kennedy Airport that includes dozens of daily flights to Europe. Delta officials' plan is that by increasing Delta's presence at LaGuardia, where there are no international flights except for flight to Canada, Delta will be able to offer a full menu of domestic and international flights, albeit split between the two airports.

Southwest Airlines, the USA's leading low-fare carrier which last year began serving LaGuardia and the New York City market for the first time, was among the airlines at LaGuardia designated by the FAA as newcomers or small incumbent carriers to whom Delta and US Airways could sell divested slots there. But Delta and US Airways left Southwest out in the cold with their proposed counteroffer to the FAA on Monday.

Southwest on Monday filed a quick response to the revised Delta-US Airways assets swap deal, saying that the two carriers should be required to divest the full number of slots ordered last month by the FAA, and that they should be sold via an auction to the highest cash bidder, not through privately negotiated deals.

Of the New York City area's three major commercial airports, LaGuardia is the most preferred by business travelers, who typically pay higher fares. That's largely because it is the closest to midtown Manhattan and the Financial District.

Similarly, Reagan National is more popular with business travelers than either Washington Dulles or Thurgood Marshall Baltimore-Washington Airport because it is just across the Potomac River from downtown Washington.

But both LaGuardia and Reagan National are tiny airports in terms of land space, and they can't be expanded because they are surrounded by development and water. That inability to add more runways, and the high demand for service, led to the creation of slots as a way of limiting the number of flights that can operate at those airports in an hour.

Service at both airports is further limited by perimeter rules that prevent, in most cases, flights to and from cities in the Mountain and Pacific time zones. In most cases passengers traveling to and from cities in those time zones have to use one of the other airports in the New York and Washington areas.

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