Delta and US Airways Cancel Slot Swap, Feds Lose Game of Chicken, Win Cranky Jackass Award

I assume the feds knew they were playing with fire when they decided to attach incredibly onerous conditions to the proposed slot swap between US Airways and Delta in Washington and New York. Now, US Airways and Delta have officially decided to reject the requirements and stick with the status quo, unless they can win in court. Absolutely nobody wins here, and that’s why the tentative order issuing the feds a Cranky Jackass award is now a final order. This was just a bad move.

Delta and US Airways play game of chicken with FAA

I’ll spare you the history again since it’s been recounted here multiple times. In short, Delta wanted to trade much of its slot holding at Washington/National to US Airways for that airline’s slots at New York/LaGuardia. The feds came back saying they’d only approve it if the two agreed to divest a bunch of slots to new entrants before the transaction occurred. That wasn’t palatable to anyone, but Delta and US Airways did come back offering to divest some of the slots to carriers with whom they had already set up agreements. It looked like the FAA had achieved its goal of giving slots to new entrants, but the agency wasn’t satisfied. The feds stuck to their guns and that’s how we got where we are today. (More details here)

US Airways and Delta had asked for more time to consider the swap, and the feds gave it to them. But last week, they decided to reject the requirements for divestiture and sue the pants off the government for such an absurd requirement. So let’s review exactly what the feds have thrown away here:

  • US Airways would have used larger planes in Washington and would have opened nonstop serviceCranky Jackass to several cities that don’t have it today.
  • Delta would have used larger planes in New York to create a hub operation at LaGuardia.
  • Terminal changes in New York would have made it easier for customers.
  • US Airways would have received rights to fly to Japan; a new entrant into that market providing more competition.
  • US Airways would have received rights to fly to Sao Paulo; again, a new entrant in that market.
  • JetBlue would have received 4.5 slots at National. (The last .5 slot was available in off peak times.)
  • WestJet would have received 5 slots at LaGuardia, providing competition to Canada.
  • Spirit would have received 5 more slots at LaGuardia, providing low fare service.
  • AirTran would have received 5 more slots at LaGuardia, providing low fare service.

And now, none of this will happen. What’s the cherry on top? The feds get to waste our taxpayer money defending themselves in a lawsuit that will undoubtedly drag on for awhile. In short, the feds decided to play a game of chicken and they lost. Now, everybody loses. Way to go, guys. I bet you thought they’d give in, but they didn’t. You blew this one.

[Original photo via Flickr user Chief Trent]

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37 Comments on "Delta and US Airways Cancel Slot Swap, Feds Lose Game of Chicken, Win Cranky Jackass Award"

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DGS
Guest

Does the DL/US lawsuit have a chance here? And/or will it actually get filed and moved in time to make a difference?

If US is losing as much money as they claim to be losing at LGA, they might as well shutter LGA if they won’t get a resolution until 2014 or so…

tharanga
Guest

A bit slanted here. You can just as well say that US and DL lost the game of chicken.

We won’t really know who won or lost until the lawsuit plays itself out.

And the lawsuit would be a useful thing, as it should set some precedent that would be followed in future instances. We’ll find out what the DoT can and cannot do.

stan
Guest

a giant win for NYC travelers. delta taking over LGA would have been a disaster for everyone. despite your bullet points (i have no idea why you love delta so much considering they horrific customer service at LGA), there is still no reason for this from a consumer point of view. we don’t need 5 more airtran flights a day to ATL, or five more spirit flights a day to ft. lauderdale or ft. meyers.

and US has no business flying to japan or brazil in their disgusting, uncomfortable long-haul fleet.

chris
Guest

Cranky makes the point that this will provide larger aircraft with service to more destinations. DL would be able to better leverage NYC and move service from JFK –> LGA reducing the congestion there and US would increase its presence at DCA (and aircraft).

Both airlines would arrange to re-do their terminals providing a MUCH better passenger experience. It would have been a win for all sides. Too bad the DOT can’t see that (though I have a feeling WN has a significant gripe about this as they didn’t want to pay the market value for the slots).

nab
Guest

I don’t think it is so much that WN does not want to pay market value for the slots (isn’t that what an auction would do, set market value?) as it is that there are no slots available right now at any price.

The question is “Who has the ownership of the slots?” Is it the federal government or is it the airlines who have held these slots since deregulation?

tharanga
Guest

If you read the law, it is completely unambiguous. The government owns the slots. The airlines hold them, the airlines can exchange them with each other, but they are absolutely not private property, and the federal government reserves the ability to mess with them.

I suppose the question in the lawsuit will be how absolute/discretionary that government power is – for what purposes can the government mess with existing slots.

David SF eastbay
Member

I don’t think US growing bigger at DCA or DL in NY is going to help anyone in the wallet except maybe US and DL.

But as the saying goes……’It ain’t over until the fat lady sings’

Oliver
Guest

Maybe i am naive, but I think slots should be leased to airlines (like gates at airports or apartments to renters). The airlines can vacate slots when they are no longer desired, and the government can then rent them to someone else (maybe using an auction process). If I rent an apartment, I can’t just swap it against a buddy’s apartment just because it would be more profitable for both of us.

Jason H
Guest
Actually depending on the contract language of your rental agreement you can do exactly that. I rented at a place near Denver that had language stating that if two parties swapped apartments that was within the rights of the tenants and that the tenants would basically switch contracts, monthly rates and all. As to the slot swap. I hope US/DL win. It is ridiculous to think that the DOT is blocking companies that are trying to make a profit (I know, a bad word in this current world) and are going to fly larger planes and were even willing to… Read more »
Sean S.
Guest
Wait a second there. The DOT isn’t “blocking” this from happening; what they were trying to do was negotiate what they felt was a better deal to level competition. Obviously their leverage wasn’t enough and their bluff was called; that doesn’t mean they are out to ruin companies bottom lines. Lets be clear about what the sticking point is here, which isn’t divestiture (something most airlines have had no problem with during mergers). It was to do with that the divested slots will go the companies they choose, robbing the DOT of being able to auction the slots off at… Read more »
tharanga
Guest
On the sticking point: I don’t know about that. After all, US and DL submitted a plan that had the same structure as what the DoT wanted; it just wasn’t big enough in terms of divestiture. Anyway, if it’s going to a lawsuit, the time is passed for mere opinions. It is time for a close reading of all the law: statue, case and regulatory. This is what I found, in Title 14 Code of Federal Regulations PART 93 “(a) Slots do not represent a property right but represent an operating privilege subject to absolute FAA control. Slots may be… Read more »
Jason H
Guest
@Sean S Block is exactly what the DOT is doing. US and DL want to swap slots and were willing to divest several of them to LCCs, but the DOT wanted to gut the deal to appease the 500-ton gorilla based at Love Field. I agree that a full swap looked bad, but giving slots to other carriers (especially DL giving anything to AirTran) showed they were willing to work with the DOT. In the end the DOT is blocking a deal that would help the bottom line profits of 2 large carriers. As I said before though, that foul… Read more »
Sean S.
Guest

Yes it would help the bottom line of two carriers at the expense of other airlines at the same airports. If the swap were to have occurred as US Airways and Delta planned it would have resulted in the dominance of each in their respective markets, further locking out competition in those airports. And there are no guarantees that smaller and more regional airports would be served from those locations. Its especially ridiculous for US Air/Delta to complain when even with the divestment their increase in control would have still been substantial.

Oliver
Guest

I’d think there are other companies interested in those slots that are also trying to make a profit. So to argue that the DOT is trying to keep US/Delta from making a profit is a bit of a simplification. Why is Delta/US’ profit more important than that of their competitors?

Patrick Flannigan
Guest

This whole befuddled back-and-forth process has been a sideshow. I sincerely hope that Delta and US win out in court but I’m not placing any wagers just yet.

Ed Casper
Guest

I may be dead wrong, but based on my observations, it seems that most lawsuits are settled, not litigated. This suit may very well be another part of the game to get a better deal from the feds.

jaybru
Member
Cranky, couldn’t you stick with something like: “Why is my air fare so high?” Anything related to “slots,” particularly when Reagan National is involved, is unlikely to be resolved in a manner you or I might think equitable. Forget it. This has the potential to be tied up in politics and the court system forever, and beyond. FAA/DOT authority, whether for making a requirement to divest, to do whatever; consideration of the virtue/economics of slot auctions; need to ensure equal opportunity to the old, new, low-cost, not-so-low-cost carriers; proper deference to congressional interests to ensure appropriate service to every district,… Read more »
Nick Barnard
Member

Uh Jay, No one probably was flying IAD-LAX during that time. So they were just trying to fill seats.

jaybru
Member

Seriously, I jest! Hard to tell sometimes, isn’t it.

I’m sure somewhere out there in blogger land someone is saying: “OMG, another idiot demanding his $99 fare!” Whatever!

PHILL
Guest

Seems like the only winner here is AMR, who have been ramping up their efforts at LGA and NYC in general, and who now don’t have to worry about even more competition from more new entrants to the NYC market. (Except JetBlue…).

Nick Barnard
Member

And JetBlue and AMR have a cooperation agreement of some kind. I forget if it’s a codeshare or just an interline agreement of some kind.

tharanga
Guest

as it stands, it’s just an interline, but everybody including the airlines themselves are making it sound like a bigger deal than that. So maybe it’s an interline backed by more marketing than normal.

robert
Guest

Cranky is failing to recognise that ‘government knows best’ :)

jaybru
Member

Along these lines, I see today’s (Wednesday) Washington Post has a front page, above-the-fold, Lisa Rein story: “Flight restrictions at National targeted.” Discusses attempts by various politicians to limit, not-to-limit, activity at DCA and revise the perimeter rules. FAA authorization bill language, etc.

I remember reading stories about this issue in the late ’60s. Moving on…!

Greg
Guest
Let’s face it, Washington has too much power. I promise you if any airline offered direct service to Congressman X’s hometown from DCA, the deal would be approved. We no longer care about the free market (if I don’t like an airline’s offerings from airport Y I’ll drive to airport Z and fly airline N). No, no we expect that every airline should offer 1998 prices my city to where I want to go, oh, and if I have a powerful congressman, I should get a discount. We don’t want airlines to make money, because only the government should make… Read more »
JP
Guest

Well, we all know that Obama and his minions know that a flight from DCA-BFE will create a new job in BFE…sure, 10 jobs will be lost due to decreased productivity, but Obama will claim the extra TSA employee at BFE.

It’s time to let the market make the decisions.

Mark
Guest
You really should note that four of the markets that US Airways was planning to add – Birmingham, Montreal, Ottawa and Tallahassee – are getting new service anyway. And Delta is going ahead with new service from LaGuardia to Nashville and St. Louis. Clearly, the slot swap isn’t stopping the airlines from adding service to these markets. Consumers would have lost if the transaction was approved by way of giving Delta and US Airways far too much pricing power in the LaGuardia and Reagan markets, respectively. Who cares if AirTran would have gotten five slots when that’s simply not enough… Read more »
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[…] It’s the increase at Washington/National that has me perplexed. As we all know by now, Delta and US Airways were trying to arrange a slot swap where Delta would give most of its slots to US Airways at National in exchange for US Airways slots […]

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