DOT Proposes to Grant US Airways/Delta Slot Waiver with Conditions

Yesterday, the U.S. Department of Transportation announced a proposal to allow US Airways and Delta Air Lines to transfer takeoff and landing rights at New York LaGuardia and Washington Reagan National airports.

In 2009, both airlines requested approval for a similar slot swap transaction at both LGA and DCA.  However, DOT announced it would allow the slot swap only on the condition that both carriers divest themselves of 14 slot pairs at DCA and 20 pairs at LGA in order to reduce the impact on competition and to provide more opportunities for new entrant carriers at both airports.  Both US Airways and Delta rejected DOT’s condition.

In May, the carriers announced a revised slot swap agreement and submitted the proposal to DOT.  Under the revised agreement, Delta would acquire 132 slot pairs at LGA from US Airways (increasing its percentage of total slot pair holdings at LGA from 24.3 percent to 47.5 percent) and US Airways would acquire from Delta 42 slot pairs at DCA (increasing its percentage of total slot pair holdings at DCA from 44.2 percent to 54.1 percent), the rights to operate additional daily service to Sao Paulo in 2015, and $66.5 million in cash from Delta.  In addition, to win DOT approval, the agreement included a willingness from both carriers to divest of up to 16 LGA slot pairs and 8 DCA slot pairs to airlines with limited or no service at those airports.

Under the new DOT proposal, the Department is tentatively approving the carriers latest agreement subject to a number of conditions designed to protect consumers.   The primary condition is that US Airways and Delta divest themselves of 8 pairs of daily slots at DCA and 16 pairs at LGA.  The slots would be sold by the carriers and all proceeds of the sales would be collected and retained by both carriers.

Moreover, under the DOT proposal, the slots would be divested through a blind sale to airlines that currently have fewer than 5 percent of total slot holdings at DCA and LGA respectively.  Incumbent carriers at DCA that would qualify include AirTran, Spirit, Sun Country, JetBlue and Frontier.  At LGA, incumbent carriers that would qualify include AirTran, Southwest, Frontier, JetBlue, as well as Spirit.

Additionally, under DOT’s proposal, slot pairs would be sold in a bundle of 8 slot pairs at each airport, meaning there would be one bundle at DCA and two bundles at LGA.  Finally, both US Airways and Delta would be required to wait 90 days before starting any new operations under a phase-in basis.  Under the first phase, no more than 50 percent of the total number of slots included in the agreement could be operated between the 91st and 210th day following the closing date for the sale of divested slots.  Both carriers would be free to operate the remainder of the slots immediately thereafter.

DOT is currently asking for public comment on its proposal.  All comments are due within 30 days of yesterday’s announcement.

Please contact ACI-NA Paul Eubanks with any additional questions.