In the immortal words of Dennis Hopper (rest in peace, you crazy bastard) . . . pop quiz, hotshot. Let’s say that you’ve been presented three deals impacting the most dominant airline at a highly-congested airport. You can approve one. Which would it be? Here’s what the airport will look like after the deal is approved:

You’re probably thinking that B looks best, and there’s no chance anyone is going to pick deal A, right? But that’s exactly what’s just happened now that the Department of Justice (DOJ) has given its approval to United and Continental to merge. All Continental has to do is take United’s 18 daily flights and give those slots (or equivalent) to Southwest. Done deal. Those other two deals? Yeah, that would be the rejected slot swap between Delta and US Airways in Washington (C) and New York (B).

I know, I know. These are totally different things and the approvals came from different branches of government. True, but it also shows how screwy it can be dealing with the feds. I should be clear here. I think the Continental and United deal should be approved. I just think the slot swap should have been approved as well.

Let’s start with the Continental/United deal. Apparently, the Department of Justice (which tends to be more strict than the Department of Transportation) had no concerns about this deal outside of Newark. Newark, of course, is a highly-congested airport with no slots available. So Continental agreed to permanently lease 18 slot pairs (the same number of flights United operates today) to Southwest. In other words, United gives up its slots to Southwest and everything else is fine. Here’s the state of the airport after this deal.

I’m sure Southwest is thrilled to be getting in there, but it’s still a pretty small number of flights in the scheme of things. And of course, everyone else is still frozen out for now. Contrast that with the slot swap deal. First, here’s the Washington/National chart had the deal been allowed to go through.

Here you can see an airport with more balance and greater low cost carrier penetration than Newark, but that’s nothing compared to LaGuardia.

When compared to National, there’s a greater transfer of slots here, but the dominant carrier would still have held a smaller position than at the other airport. Note the even higher LCC penetration of 12.7%. That’s more than double where Newark will be after Southwest gets its 18 slot pairs. So what gives?

Well it’s hard to say exactly what’s going on when you’re dealing with political bodies. Making sense is never the highest priority. But in this case, I would assume it’s simply an issue of looking at current versus potential scenarios. Continental won’t grow in Newark with this transaction while Delta and US Airways would have grown at LaGuardia and National respectively in that deal. Really, that shouldn’t be the issue here.

If the feds want to act like they’re sticking up for the consumer, they have the ability to hold airlines over a barrel. The Department of Justice chose not to do that with Continental and United while the Federal Aviation Administration has apparently gone the opposite route with the slot swap. Go figure. One thing we do know is the feds do seem to love Southwest these days.

You’ll remember that Southwest voiced a large number of objections when it came to the slot swap. The feds came back and agreed with the airline. Remember, Southwest actually said that open auctions were the best outcome. Now it’s gone and done a back-room deal. Not bad for Southwest, and certainly not bad for Continental and United. Then again, it probably just frustrates Delta and US Airways even more. Or maybe not.

Maybe this suggests that the better path for US Airways is to get bought (as they’ve been saying for some time anyway). Then it won’t need to get an FAA waiver to give its LaGuardia slots to another airline. It’ll be that other airline, so the FAA won’t get to ruin the party. If this helps build up US Airways’ efforts to get bought, then that’s good news for the airline.

Never a dull moment inside the Beltway, that’s for sure.

On Friday afternoon, Southwest announced it came to an agreement with Continental to lease 36 slots at Newark. Holy crap. Has hell frozen over? Nah. Just two hours later, Continental and United announced that the Department of Justice (DOJ) has found no antitrust issues with the merger. Ahhhh, I get it. That was easy.

I’m talking more about this from the Continental/United perspective at BNET, but here I want to focus on Southwest. An airline that used to consider Islip a New York City airport will now be serving two of the biggest and most congested airports serving New York. Crazy.

This slot deal will allow Southwest to have 18 flights in and 18 flights out per day, unless they figure out some magical way to have more departures than arrivals. I’m gonna guess that physics makes that a tough sell. The first flights will begin next March with the full amount of slots going into Southwest’s possession by June.

This move is really funny when you think about it. It’s old-school Southwest meets new-school Southwest. Yes, the airline is flying into one of the most crowded, delay-filled airports in the US. You never would have seen that 10 years ago. But it’s also the tried and true Southwest strategy of bracketing a big metro area. You now have LaGuardia on the east (along with Islip on the waaaaay east) and Newark on the west. (It also conveniently brackets New Jersey with Philly on the South. That’s about as close as you’d want to get to NJ anyway.)

So what is Southwest gonna do with this? Well, 18 flights is a lot. It’s more than double the measly 8 flights they were able to squeeze into LaGuardia. At LaGuardia, there are five daily flights to Chicago/Midway and 3 down to Baltimore. But for Newark, we have some good guidance. Take a look at what the DOJ had to say about this:

The proposed merger would combine the airlines’ largely complementary networks, which would result in overlap on a limited number of routes where United and Continental offer competing nonstop service. The largest such routes are between United’s hub airports and Continental’s hub at Newark airport, where Continental has a high share of service and where there is limited availability of slots, making entry by other airlines particularly difficult.

In other words, Chicago/Midway, Denver, and Houston/Hobby have to be a lock. Baltimore? Probably. (And, as I talk about on BNET today, Continental and United must be happy not to have exact airport competition on these routes.) You could probably fill a schedule with that pretty easily, but there could be other cities as well.

Unlike from LaGuardia, Southwest can run Phoenix or Vegas from Newark, if it so chooses. The reality is that with Southwest’s focus on business travelers, Florida might not make as much sense. Sure, you can always fill those airplanes, but with scarce slots, that doesn’t seem like the best plan. Then again, maybe we’ll see Florida at some off-peak times.

Southwest has to be thrilled to have benefited from the merger here. Apparently the feds were happy with this deal as well. It may not seem like a huge number of slots, and really, it isn’t. For United and Continental’s nearly 450 flights per day, this is a drop in a bucket. Then again, Southwest does know how to make a drop in the bucket feel like a tidal wave.

Some feel blue as United, Continental wedding mixes old, new – Chicago Tribune
The Trib looks at the United/Continental branding efforts, and I chime in with why I’m not a fan of what I’ve seen so far.

American’s Express Seats: How Not to Introduce New Fees to Customers – BNET Headwinds
American has a new fee, and while it could be relatively straightforward, the way American released it was anything but.

US Airways Positions Itself as a Takeover Target with New York Moves – BNET Headwinds
The US Airways build-up in New York seems goofy, but it could actually be a smart play to get itself bought.

Passengers shocked by new touchy-feely TSA screening – Boston Herald
I didn’t even know that the TSA was tightening its screening process until I was contacted for this article. Sounds like a cheap way to get felt up to me.

Hmm. Alaska Air Group May Be Looking to Sell Horizon Air – BNET Headwinds
Horizon Air has changed its business model, and that has me wondering if Alaska is looking to sell.

Mammoth Mountain Lures United to Bring Bay Area Folks to Ski – BNET Headwinds
Another small town getting new air service. But this one makes more sense than many.

American Mechanics Shoot Down Tentative Agreement, Move Closer to Strike – BNET Headwinds
Unsurprisingly, American’s mechanics voted against the tentative agreement that had been presented. They’re moving toward a strike, but I doubt they’ll ever get there.

If you haven’t heard of Hipmunk, it’s no surprise. The site only launched in the last couple of weeks, but it’s off to a good start. If you book flights, it’s a site you’re going to want to bookmark. Hipmunk has the potential to make booking flights easy, but it’s not quite there yet. A couple of tweaks, and we’ve got a winner.

Hipmunk was actually started by a couple of guys with no travel industry experience. That is generally not a good sign since navigating the world of selling travel requires some serious insider knowledge, but it also means they can look on the process with fresh eyes. I spoke with co-founder Adam Goldstein and he walked me through their thoughts. I think they’re on a good path. Here’s what the search results page looks like (click to enlarge):

The idea was to create a very simple and clean way to book travel. So to start, they’ve contracted with Orbitz for the feed and they’ve slapped their user interface on top of it. The result looks a lot like what you might find on ITA Software, but with booking capability. The goal was to put as many flights in as small of a space as possible. This set up allowed them to show you all possible options on one screen so that you don’t have to keeping clicking to see more options. It works quite nicely.

There are a few things that really make this stand out in my mind.

• The “Worse” Feature
  On the far right side, you’ll see random scattered “worse” buttons. This is all part of the plan to reduce the clutter on the screen. The worse button automatically hides flight options that nobody would want. I should say, almost nobody. For example, let’s say you’re connecting. There might be an option that has the same connecting flight but an earlier first flight, like this.
  

  That longer layover in Denver might be great if your Great Aunt Mildred lives there, but otherwise you don’t want it. But that’s why they hide it instead of delete it entirely. The info is still there for the rare few who dream of a long layover.

• The “Agony” Sort
  The first sort you see is not intuitive. It’s the agony sort, which right now looks at price, total trip duration, and number of stops.

  The idea is to get away from the straight price sort, and that’s a good thing. But it’s not where it needs to be. Adam mentioned that they were talking about creating a profile where you could sign up and create your own variables for the agony sort. Then anytime you search, it would use those presets. This would be excellent. Right now, the first thing that pops up in the above agony sort is a nonstop but it’s a redeye. I hate redeyes, so I would want to have that in my profile and have it never show up at the top again.

• The “Time” Bar
  You’ll notice there are no time filters here, and that might bug some people, but the filter is actually hidden in the site. On each side, there are black bars that you can drag to be your earliest start time and latest arrival time. It would be nice to have a little more flexibility than that, but with the searches I’ve done, it’s actually narrowed it down plenty.

There are a few bugs here and there, but it’s only been up for a couple weeks so they’ll work through them. Once they have more providers that can provide more robust info, this site will be come even more useful. Like I said, I like where it’s going. It’s just not quite there yet. And that’s why this is a travel tool I might love.

And now, it’s time to talk JetBlue. When I read a recent article where David Neeleman talked about JetBlue, I thought he sounded bitter, so I had to ask. It’s clear that he’s still bugged by what happened at JetBlue, and as a shareholder, he wants to see things change. You can catch up with part one and part two, if you missed them.

Cranky: Some would say that the rapid growth of JetBlue is what caused you problems there. Is that an issue here? Or do you not think that was issue there?
David Neeleman, CEO Azul Airlines: I’m not gonna tell you it wasn’t an issue. JetBlue was kind of built for lower fuel costs than what we had. So it took an adjustment period. That was part of it, certainly infrastructure. I was more focused with growing the business from a marketing perspective and I think our operation didn’t keep up maybe as well as it should have.

I had a COO [current President and CEO Dave Barger] that was in charge of that. I think the Valentine’s Day storm showed a weakness in operational recovery areas so that’s an issue. I looked at that experience in Brazil and we have a great team of people down there. We built all of our systems in the beginning, where JetBlue should have been. There was some people who were supposed to be focusing on that, obviously they weren’t. So I’m not leaving anything to chance.

Cranky: It seems, the article I was reading, it seems that there’s still sort of an almost bitterness about what happened there. Maybe it’s just a dissatisfaction. Does it still bother you? Obviously, Azul means blue. Is this still something that bugs you?
David: Yeah, it bugs me. You had a board that was rash and hasty and made a decision that didn’t need to be made at the time. The crewmembers didn’t really deserve that kind of treatment either. They had a certain vision for the company, an expectation. All of a sudden overnight that was changed. Things are different at JetBlue today. They’re not the same as they were.

Maybe some areas they needed a change, but you know, the camaraderie we had, a lot of things we did in the customer service area, I just don’t think it’s the same company and there are a lot of people lamenting that. Every time I fly, people say such things. “Wish you were back.” I wish they would say, “We’re doing great, it’s awesome. Thanks for starting it.” I would much rather have that.

I built JetBlue for one reason. I didn’t need the money. I wanted it to be a great place to work, a great place for people to fly differently than the other guys. Same thing at Azul. It’s your legacy, you know. And you want to make sure. I still think JetBlue is better than anyone else but it’s not the same. When you get bigger, it’s hard to keep it the same. But Southwest Airlines has been around for 40 years and they’ve been able to maintain a lot of happy people working there.

Cranky: You’re still a fairly large shareholder. As a shareholder, what would you want to see JetBlue do differently?
David: I would like to see it focus on customer service. I tell people that at Azul. I only have two goals for the company. I want this to be the best place you ever worked and I want every customer to say, “wow, that was a great flight.” If you can do those two things, you’re gonna grow and be successful. That’s really it. It’s just a focus. I’ve been on some delayed flights on JetBlue lately and didn’t hear anything about the customer bill of rights. In those days, we did things that were special.

JetBlue still wins the JD Power award every year but if you look at the scores, it’s all the TVs and more legroom. If you look at the customer contact scores, Southwest wins all those awards, those categories. And they never did. I think you can make a difference in a commodity business.

Cranky: Back to Azul for a second then I’ll let you go. Can we expect to see Azul outside the Brazilian borders?
David: The market size just isn’t that big. Don’t know if you saw the news on TAM and LAN, still trying to figure out what the heck that is, but the cross border stuff in South American countries is just a tiny fraction. Maybe it’s just a play for TAM to get some management over there, but the market’s just not that big and the market in Brazil is huge. So we’re going to focus on Brazil. Never say never, but we’ve got plenty to do.

Cranky: Not likely to see any widebodies coming in, right?
David: No, not now. We’re small guys now. We like smaller – much bigger opportunity there.

Cranky: I appreciate it. Good luck continuing to grow Azul. Maybe one of these days I’ll be down there and take it for a ride.
David: That’d be great, we’d love to have you.