US Airways and Delta Throw Down with the Feds and Southwest Over Slot Swap

This whole US Airways/Delta slot swap in DC and New York just keeps dragging on and on. Have you had enough yet? Just wanna see it end? I’m with you, but the fight continues, and Delta and US Airways are done playing nice. In their latest filing with the feds (I can’t find it on regulations.gov so you can download here), they take aim at the FAA for not having the jurisdiction to require divestiture and at Southwest for, well, being a punk, it seems.

Delta and US Airways Fight FAA and Southwest

The filing starts off as you might expect, with a summation of their new plan to sell slots to a few other carriers and an explanation that it is so totally awesome, the FAA should be all over it. You know the deal, but as a refresher, they’ll give 5 slots each to Spirit, WestJet, and AirTran at LaGuardia along with 4.5 slots at National. Actually, I didn’t know it was 4.5 slots until I saw this, but I assume they’ll just get the other half slot during an off peak time where slots are currently available. Otherwise, that plane will be stuck at National forever.

After we get past the formalities, they start revving up the anti-Southwest machine. Why should the feds approve this deal and not require an auction of slots?

. . . unlike an auction, which would likely lead to Southwest obtaining all the slots, the modified transaction transfers slots to multiple carriers.

Oooh, slam. Why are they hating on Southwest? Well, first of all, they say:

For it’s part, Southwest simply seeks to exploit this transaction to obtain a competitive advantage for itself.

Also, Southwest filed comments that they’re strongly against the deal, and now Delta and US Airways are letting it rip. They go on and on about how Southwest has had numerous opportunities to get in to National yet they haven’t done it. That’s true. If you really want in, you can find a way, but apparently getting slots from Delta and US Airways are not going to be an option.

Delta and US Airways may not be thrilled with Southwest these days, but they’re pretty happy about American and JetBlue. See, the American/JetBlue swap gives JetBlue even more of a presence at National which, in their eyes, makes for better competition (or so they hope the FAA believes). But regardless of which airlines they love and which they hate, they reserve much of their wrath for the feds. At one point, they even offer a (very) thinly veiled threat of legal action.

Approving the proposed modified transaction would also have an additional important benefit for the FAA. It would allow the FAA to avoid acting in a manner that would subject it to legal challenge. The parties retain the right to challenge any imposition of a divestiture condition, and such litigation would be likely if the modified transaction is not approved.

I won’t bore you with all the details. I mean, these guys must be paying the lawyers a lot, because they’ve cited a lot of precedent and highlighted many inconsistencies in great detail. You can read through this lengthy document on your own. In my eyes, there really were two points that stood out.

  1. The DOJ’s claim that the FAA’s proposed divestitures will not interfere with the transaction’s benefits ignore the parties’ unequivocal statement that they will not go forward with the transaction as conditioned by the FAA.
  2. [The DOJ] completely fails to acknowledge the loss of service to small and medium communities that would likely result from its proposal.

I think both these points are important, though the first one has lost some of its power. They seemed to be pretty certain that this deal wouldn’t get done if they had to give any slots away, but they came back with a modified proposal that offered just that. Do I believe this is the absolute final deal? You know, maybe if you get them in a room they could go back and forth a little bit but I doubt we would see any substantial changes going forward. It’s take it or leave it.

That second point is the one that I think is always overshadowed here. You get a low cost carrier in there and they are going to fly on routes that already have flights. They’ll look at the Bostons, the Chicagos, the Atlantas, and the Floridas. While it’s certainly nice to have more competition in those markets, it’s also important to offer more diverse flying opportunities. The low cost carriers won’t serve the small cities, but US Airways and Delta will. That’s why the smaller cities are lining up to support this swap. They want service, and I don’t blame them.

This filing takes on a pretty aggressive tone, and that’s kind of fun to watch. It appears that they certainly are ramping up for a lawsuit if necessary, but hopefully that’s just posturing and it won’t need to get to that point. I still think this swap is the right thing to do.

Of course, if the once-again-hot rumors of a US Airways/United merger are true, this deal is completely toast. But that’s a post for another day, if these rumors ever become more substantial.

22 Responses to US Airways and Delta Throw Down with the Feds and Southwest Over Slot Swap

  1. Greg Witpen says:

    Hey Cranky – search FAA-2010-0109 on regulations.gov

    The docket is there.

    • CF says:

      Finding the docket wasn’t my problem. I just can’t find this particular submission. If you find it, feel free to post the link here.

  2. Alex Hill says:

    Re United/US Airways: If they do merge, wouldn’t slots at LGA be far more valuable to the combined airline than slots at DCA, given the hub at IAD? With a merger, presumably they could use the LGA slots for larger planes than US Airways currently does and seriously compete for the New York market.

    • CF says:

      I doubt it. Neither UA nor US has a strong presence in NYC, so the two of them together won’t really help that much. The last thing NYC needs is another airline jumping into the fray to try and fight for share. It’s so crowded now.

  3. SEAN says:

    There’s a story in the NY Times reguarding the reemergence of a United US Airways merger. If so, you can forget about a hub at National despite it’s a short Metrorail ride from the district

  4. “””””For it’s part, Southwest simply seeks to exploit this transaction to obtain a competitive advantage for itself.”””””

    Oh and DL and US aren’t trying to obtain a competitive advantage for themselves at LGA and DCA!

    Maybe it’s time for the feds to just totally control DCA and be done with it. They would pick nonstop routes, set the times and set a simple average fare and the airlines would all apply to serve the routes. No over lapping of servce, no fare issues, more access to cities around the country to have nonstop service to the nations capital.

    That or just shut it down and build the world’s largest Walmart, makes as much sense as anything else.

  5. Jason H says:

    I think that DL and US have a valid point in wanting to pick the recipients of the slots. WN has the cash to buy them all up and shut the other carriers out. DL’s talks with WestJet might complicate things a bit, but by and large I think this is probably the best division of the slots. And DL/US are right that the small communities are the ones with the most at stake here. The LCCs just don’t serve the small communities like the legacy carriers do. Sure the service is on a 50-seat RJ or less, but that is what the markets support.

  6. Ed Casper says:

    I have a sneaking suspicion that the potential US / UA merger may be a “plan B” if this slot swap doesn’t materialize. US’s LGA operation would benefit greatly from the enhanced network United’s routes would create. There will have to be divestitures in the DC market under either scenario.

  7. yo says:

    I think its great that someone is standing up to SW. SW has had every chance to get into DCA, but they prefer to scavenge for it. Access to DCA and LGA should be available to new entrants (as it was for HP and F9) and DL and US are more than happy to provide it (while giving Southwest a much needed stab in the back)

    Great stuff. I’m just waiting for Southwest to cry foul because they are the only carrier not to charge for baggage.

    • Shane says:

      You are correct that Southwest has had minimal opportunity to enter DCA via ATA, which they declined. However, think ATA only had 2 slot pairs that could be transferred and 2 went back to DOT (somebody will correct me on that fact). However, Southwest WOULD be a new entrant into DCA. Personally, I’d rather see them build IAD into something bigger than provide overlapping routes at DCA. Although I would like DCA to Midway flights back (again, personal reasons).

      • I agree, I am not crazy about WN at DCA but would be thrilled w/ DCA-MDW flights on any carrier. I still say that is something FL should start if it picks up DCA slots.

  8. CP says:

    How funny to see these two carriers who so bitterly fought with each other during USAirways’ attempted takeover of Delta now cooperating.

  9. Ron says:

    So, Cranky, a lot about the East Coast lately. How about the West Coast? Is L.A. heating up with Delta’s attempt at creating a hublet (again?), a renewed interest in Canada, and so on?

    • CF says:

      I don’t think the Delta moves in LA are much to talk about yet. They’re just going to be wasting their money going in to LAX-SFO again with a few frequencies. I would be surprised if it became a hublet anymore than it is now. I think the biggest thing for them will be when Alaska finally moves over to Terminal 6. Then they will be colocated behind security together and can feed each other much more efficiently. I haven’t heard anything about timing on that in awhile though.

      • DL’s trying LAX-SFO AGAIN?!?!?!?! really, that’s ridiculous. can’t they just strong-arm alaska/horizon into doing a few flights a day for them? i’ve flown that run on mainline DL (late 90s) and skywest (2007) and never was a plane more than half full, usually more like 1/4 to 1/3.

        speaking of which, skywest doing 6x LAX-LAS flights which has to be a similar dog for them.

        • Yeah Bill from DC, looks like mid June start up with 4 flights. Two DL 737’s and two Skywest RJ’s. You would think they would just have one flight in each direction to connect to/from the LAX-SYD flights for some extra feed. Guess they think all those flights every day on UA/WN/AA aren’t enough for the traveling public…..lol

          • I forgot about feed for SYD flight. Connecting pxs were never an issue for DL at LAX in previous iterations. So it might make some more sense than I originally suspected but two 737s? I find that almost as amazing as the original announcement.

        • QX would be problematical, since SFO only allows props for a few UA remote stands, and QX is phasing out their RJs.

          AS WAS flying LAX-SFO… and losing buckets of cash. It’s a brutal market- WN, VX, UA, AA, and now DL.

          • you are correct. i guess DL just has to suck it up in order to feed a handful of san franciscans to its australia flights and hope there are enough DL loyalists in LAX traveling to SFO regularly who are willing to eschew either the near constant frequencies offered by UA and WN or the better service on VX for medallion miles/segments.

  10. I’m afraid the only way to settle this fairly is a dance-off.

  11. Allen says:

    I love the idea of the dance off. :)

    Because…..

    “For it’s part, Southwest simply seeks to exploit this transaction to obtain a competitive advantage for itself.”

    Yes, yes, and the same could be said about Delta, US Airways, those small cities and whomever else. They’re all (mis)using the process to keep out competition or give themself a leg up.

    Personally, I wish the FAA would get out of the business of running these airports and playing kingmaker.

Leave a Reply

Please use your real name or nickname instead of your company name or keyword spam.