Tuesday, May 24, 2011

A Delta Boeing 757-200 taking off Ronald Reaga...
Delta Takes Aim at La Guardia Amid Competition

By Mary Jane Credeur and Mary Schlangenstein - May 23, 2011 9:01 PM MT

Delta Air Lines Inc. (DAL) sought federal approval to expand at New York’s LaGuardia Airport, saying industry consolidation has helped clear the way for a trade of landing rights with US Airways Group Inc. (LCC)

Delta wants to take over 132 pairs of LaGuardia flight slots held by US Airways, which would get 42 pairs in exchange at Washington’s Reagan airport. US Airways also would receive rights to fly to Sao Paulo and $66.5 million in cash, the two carriers said yesterday.
The plan, which needs clearance from the U.S. Department of Transportation, replaces a 2009 accord that met objections from regulators and rivals including Southwest Airlines Co. (LUV) A successful deal would allow Atlanta-based Delta to boost market share in New York, where no airline has a dominant position.

“It is likely that Delta and US Airways received some indication that the DOT would find the proposal acceptable,” said Jeff Straebler, a debt strategist at RBS Securities Inc. in Stamford, Connecticut. “Given the changed competitive landscape and Southwest’s growing presence in key East Coast airports, we think the DOT is more likely to approve this go-round.”
Southwest gained LaGuardia and Reagan flights from its purchase of AirTran Holdings Inc. (AAI) this month, and it added slots at New Jersey’s Newark airport that United Airlines and Continental Airlines divested as part of their October merger.
LaGuardia Growth

Delta would end up with almost half of the flight slots at LaGuardia, which chiefly serves domestic routes. The carrier’s 2008 purchase of Northwest Airlines helped push its share of passengers to 29 percent at the end of 2010 from 22 percent five years earlier. AMR Corp. (AMR)’s American Airlines slid to 21 percent from 24 percent in the same period.
For Tempe, Arizona-based US Airways, the trade would be a chance to focus on Washington and shrink LaGuardia operations, where it has said it can’t make money. While the government approved the airlines’ 2009 proposal, neither carrier accepted the regulators’ terms for that agreement to proceed.

“We plan to review their application,” said Bill Mosley, a Transportation Department spokesman, who declined to comment further.

Delta fell 28 cents to $11.23 yesterday on the New York Stock Exchange, while US Airways slid 17 cents to $10. They were little changed in extended trading after their agreement was unveiled.

The airlines, the second- and fifth-largest U.S. carriers by traffic, said yesterday they would shed 16 LaGuardia slot pairs and eight at Ronald Reagan Washington National Airport to smaller carriers with few or no flights there to help win regulatory approval.

Trade to Grow

That’s fewer than the 34 slot pairs they were told to give up in the Transportation Department’s May 2010 ruling that approved their earlier proposal. Flights are capped at both airports, so carriers have to trade to expand.
Industry mergers, including the Southwest-AirTran deal, have brought in new carriers in New York and Washington since their initial plan was unveiled almost two years ago, Delta and US Airways said yesterday.

“There has been increased competition in that part of the world since the first deal was announced that would help the argument,” said Michael Derchin, a CRT Capital Group LLC analyst in Stamford who recommends buying Delta and holding US Airways. “It will probably be approved.”

Under the original August 2009 plan, Delta sought 125 slots for LaGuardia round-trip flights held by US Airways, in exchange for 42 such slots at Reagan.

‘More Slots’

“We are still interested in more slots, which is good for competition and good for consumers,” said Whitney Eichinger, a spokeswoman for Dallas-based Southwest. “We’ll be analyzing this new deal with that in mind.”

JetBlue Airways Corp. (JBLU), which is based in New York and has its largest operations at the city’s Kennedy airport, didn’t immediately return a call seeking comment.
Delta proposes to take control of US Airways’ Terminal C at LaGuardia and build a 600-foot connector to link the facility to its existing terminal for main jet flights. That project and other upgrades will cost $117 million.
US Airways would need to cut 300 jobs at its Piedmont regional unit and an unknown number of additional jobs if the slot trade goes through, said Todd Lehmacher, a spokesman. Under the plan, US Airways would win the right to operate daily service to Sao Paulo in 2015.

The New York region lacks a dominant carrier, with air traffic spread among LaGuardia, Kennedy and New Jersey’s Newark. United and Continental airlines led the area with 27 percent of passengers in 2010, according to the Port Authority of New York and New Jersey. Delta had 20 percent, and Fort Worth, Texas- based American had 13 percent.

“Approval of this deal will sorely challenge” American in New York, said Straebler, the RBS debt strategist. “United already has the only true hub in the area at Newark. Now Delta would be far larger than American when combining LaGuardia and JFK.”

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

Enhanced by Zemanta

No comments: