The final order has been released from the FAA and, in short, the tentative order stands. The FAA is requiring that Delta divest 14 slot pairs at Washington/National and US Airways divest 20 slot pairs at New York/LaGuardia before being allowed to complete their slot swap. This would then give Delta a net increase of 105 slot pairs at LaGuardia and US Airways 28 slot pairs at Washington/National. Because of this, I am issuing a tentative order awarding the Cranky Jackass Award to the FAA. The comment period is now open and a final order will be issued pending further information.
The history here is a long one. Delta wants to “win” New York while US Airways wants to focus on its profitable operation in Washington. This swap provided a unique opportunity for the two carriers to play to their strengths, improve the offering for customers (bigger airplanes, additional routes) and instantly improve their bottom lines. The only problem? They needed a waiver from the FAA which would allow US Airways to transfer the LaGuardia slots. Slot transfers had been prohibited in recent years thanks to a temporary order that is still in effect.
The FAA came back and tentatively approved the waiver with extremely onerous conditions. The most onerous condition of all was the one requiring Delta to divest 12 of the 42 slot pairs it was proposing to transfer at National. It wanted the slots to go to a new entrant or limited incumbent (airline without a lot of flights there already).
US Airways and Delta weren’t happy about this, but they came back with a different offer. US Airways said it would give 15 slots up at LaGuardia (5 each to WestJet, Spirit, and AirTran) and Delta would give 4.5 slots at National. This was far below what the FAA asked for, but it was an attempt at compromise.
Now, the FAA has issued its final order affirming its tentative order. The only difference? The size of the bundles in which slots must be divested. The total number doesn’t change, and this just makes no sense to me at all.
Much of the final order is spent responding to accusations that the FAA doesn’t have the authority to require these divestments. I couldn’t care less about that. The question here is what is going to be best for everyone involved?
The FAA goes on to use some fairly strange logic to support its position. The argument is one we’ve heard before. US Airways and Delta will increase their dominance at each airport and that’s a bad thing that will result in higher fares. To offset that increased dominance, they’re requiring that the airlines divest all these slots to give to low cost carriers.
This logic works just fine if the low cost carriers were actually going to use the slots to fly to some of the markets where they are concerned about competition, but that’s far from what will happen. Instead, we’ll see the low cost carriers use slots to fly on the busiest routes that already have competition. The small cities end up worse off.
Let’s look at JetBlue. As part of their American swap, they found a way to get nine flights at Washington/National. Did they send those to Buffalo or Roanoke? Yeah right. They put seven of them in Boston, where American, Delta, and US Airways already fly. They also put one in Orlando, where US Airways and AirTran already fly. Lastly, they put one in Ft Lauderdale, where US Airways and low fare king Spirit already fly.
This says nothing bad about the low cost carriers. It just shows that where low cost carrier service works, there are already a good number of options. But the most important lesson here? While the FAA is whining about airlines not being able to get into National and LaGuardia, JetBlue went in and got nine slots all by itself. Other airlines could do the same if they so chose. They just don’t want to pay the price for entry.
By taking away slots from US Airways and Delta, smaller cities will lose service while bigger cities simply gain more. The FAA complains that Delta has already said it will stop serving Roanoke, Virginia from LaGuardia, but do they really think that by giving a bunch of slots to low cost carriers, Roanoke will somehow maintain service to New York? Please.
So why is my order giving the FAA the Cranky Jackass award tentative? Well, I want to see how this all plays out before making it final. If the airlines do decide to go forward with this (which seems highly questionable at best, I believe a federal appeal is on its way), then I’ll want to see which low cost carriers get the slots and where they’ll fly. I know what I expect to happen, but I’ll wait to see it before issuing the final order.