The DOT has decided that the proposed Delta/US Airways slot swap in New York and Washington is perfectly acceptable . . . as long as the airlines agree to sell off a bunch of the slots to new entrants first. I will be shocked if the airlines go for it, and that means that basically nobody wins. Way to go, DOT. (You can read the full ruling here.)

First, let’s refresh our memories on the details of the plan. US Airways will give up 125 slot pairs at LaGuardia along with terminal space. In return, Delta will give up 42 slot pairs at Washington/National and route authorities to Sao Paulo and Tokyo/Narita. The idea was to let each airline play to its strengths in its largest markets.

Delta has been focused on “winning” New York, as we all know by now. This was going to let them serve more cities from New York than they do now, and they said it would also let them move some flights from JFK to LaGuardia in order to focus on the international hub operation at JFK. They were going to maintain flights to the markets which US Airways was leaving but they would use regional jets instead of turboprops.

Down in DC, US Airways was much more detailed in its plans. It was going to pick up the markets that Delta left, but it was also going to add service to 8 cities that don’t see nonstop service from National today. The Tokyo and Sao Paulo flights were independent, but important for them to grow their international presence in markets that are highly restricted.

The plan seemed very smart to me. There are a lot more US Airways loyalists in DC and Delta loyalists in New York, so they likely would have been happy to have the additional service from their preferred carriers. Also, additional cities would have seen nonstop service to LaGuardia and National that they don’t see today.

But now, my guess is that this plan blows up unless Delta and US Airways figure out a way to sway the DOT’s opinion. Why do I say that? Well, the DOT was fine with the plan as long as the airlines sell off some slots first. They had the biggest concern in Washington where they required Delta to sell a full third (14) of the 42 slot pairs first. US Airways will have to sell off 20 slot pairs in New York.

And these aren’t just slot sales. They are sales to airlines that hold less than 5% of the slots at each airport. No cheating allowed – the sales can’t be to any airline that is owned by Delta/US Airways or even one that codeshares with them. That pretty much means it has to be to a low cost carrier.

If you’re US Airways, would you agree to give up 14 slot pairs to an airline that is likely going to compete with you head-on just to get 28 slot pairs? I think not. What’s worse is that the low cost carrier would undoubtedly just add service on routes that already have flights today. The smaller communities would lose out.

So if this holds, I imagine it means that deal is off. In fact, they’ve said as much. US Airways President Scott Kirby said in a letter to the troops,

At this point, while we are still analyzing the DOT’s proposed ruling, we expect that if the DOT’s order is implemented as proposed (there is a 30-day public comment period before the ruling becomes final) the transaction will not go forward.

That means that pretty much everyone loses, except for the DOT which can continue to try to claim that it has saved the traveler from paying high fares, something that I think is questionable. They seem to rest on that fact that higher carrier concentration automatically means higher fares, even if most of the routes will continue to see service by one carrier, just a different one than before. (See my review of competition on these routes.) Is there any salvaging this? I hope so.

One of the complaints the DOT raised in its response is as follows:

While the carriers have made public some of their new intended services, including new service to small communities, they have not released all intended service changes.

However, it is apparent that is the proposed transaction is approved, the carriers will increase the number of markets they serve on a monopoly or dominant basis. As the two carriers reposition at LGA and DCA, there is no assurance that all markets currently being served by the departing carrier will be maintained by the new carrier.

Maybe if Delta and US Airways came out with specific service plans and included a guarantee to serve the smaller communities for a certain amount of time, the DOT would look at this differently. That would be the last gasp that I can imagine. Otherwise, it looks like the deal is dead, and nobody wins.

Why Comair’s On-Time Performance is More Concerning Than Atlantic Southeast’s – BNET
Comair and ASA both sat at the bottom of the July on-time performance derby, but the airlines appear to have two different problems.

Meaningless Mishandled Bag Numbers Plunge in July – BNET
Bag mishandlings are down, but the strange method of calculating the number makes these numbers pretty useless.

The Longest Delays Are In the Northeast – BNET
This is no surprise, but for those wanting a passenger bill of rights, I have a better idea.

Midwest Starts Milwaukee – St Louis on American’s Turf – BNET
Before American announced its St Louis pulldown, I wondered about this move. Now with hindsight, it makes sense.

Update: American Eliminates St Louis Hub – BNET
Just a quick update on my previous post.

American Raises $1.3 Billion in Cash – BNET
It wasn’t just route announcements that had American making news. They also raised a bunch of cash.

Why is Allegiant’s Load Factor Dropping While Others Increase? – BNET
Allegiant’s load factor dropped more than anyone else last month, but I’m not too concerned.

Southwest’s Bid for Frontier Raised to $170 Million – BNET
Southwest’s final bid for Frontier has been released.

American Exits the Orange County – San Francisco Market – BNET
I guessed this would happen awhile ago. American is pulling out after competition increased.

JetBlue offers a buffet of flights for one price – The Press Enterprise
We talk a little about JetBlue’s new $599 pass for unlimited travel for a month.

What US Airways Stands to Gain From Its Slot Swap with Delta – BNET
The title is pretty self-explanatory, no?

What Delta Stands to Gain From Its Slot Swap with US Airways – BNET
Let’s look at this slot swap from the other side.

Isn’t August supposed to be a pretty light month for airline news? This week has been absolutely packed with headlines, and I’m getting tired. Today I’m rolling a couple stories together that involve slot swaps. One (between US Airways and Delta) is huge while the other (between Continental and AirTran) is more of a minor thing. But one thing is clear – things are really moving these days.

The big news is the Delta/US Airways slot swap. Remember the good old days when US Airways was the “big bad predator” and Delta employees wanted to “Keep Delta My Delta”? Apparently those wounds have healed and now they’re playing nice with each other. The basic plan is this – Delta gives its Washington/National (DCA) operation to US Airways and US Airways gives its New York/LaGuardia (LGA) operation to Delta. Delta also had to throw in route authorities for Tokyo and Sao Paulo and they wanted a Pete Rose rookie card to even things out.

Why are they doing this? Well, Delta wants to “win” New York (if there is such a thing). US Airways, meanwhile, thinks the DCA slots can make them a lot more money. Ok, fine. It’s probably a smart move for both considering their strategies. I talk about that more over on BNET today.

US Airways will give up 125 slot pairs (one pair = one takeoff and one landing) at LaGuardia along with its terminal. Those slots are currently used for US Airways Express flights that buzz around the Northeast, primarily in turboprops. Here is what stays and what goes:

Everything else will go to Delta, and it remains to be seen how exactly they’ll use them. They do say, however, that they’ll add or preserve service to 30 smaller cities, including a dozen cities not currently served by US Airways from LaGuardia. They also say they’ll upgrade the props to jets and end up squeezing more than 2 million additional people a year through the airport without increasing flights. Hmm.

So Delta will set up what they’re calling a domestic hub at LGA with an international one at JFK. That’s, uh, not ideal, especially when compared to Continental’s single facility at Newark. But JFK will apparently continue as is for now and LGA will just see more flying to smaller cities. Delta really thinks they can make a go of it.

In terms of facilities, US Airways Shuttle will use the Marine Air Terminal (where Delta currently flies its Shuttle) and the other flights will go into Terminal D gates 7, 8, and 9. Delta will take over US Airways’ current terminal and pour some money into it to fix it up. (Hey, maybe you guys should pour money into that dump over at JFK instead.)

Down at DCA, it’s a different story. US Airways will pick up 42 slot pairs to add to the 175ish that they currently have. Here’s what they’ll add:

They will operate these with Embraer 190s or A319s, so it’s going to involve bigger aircraft than what Delta is using today. As far as facilities go, they need to ask the airport for facilities – Delta doesn’t own anything to give to US airways there, but this shouldn’t be a problem. US Airways is currently profitable at National and they expect this move to add to the bottom line to the tune of $75 million.

Delta will keep flying to its hubs and “select small communities.” Man, Delta is really being cryptic here, and it’s a pretty stark contrast to US Airways. I wish Delta was nearly as open as US Airways has been, but until then we’ll have to just keep guessing at exactly what they’re going to do.

But this slot swap wasn’t quite even, so US Airways has also received a route authority to fly to Sao Paulo. (They’ll go from Charlotte.) They also get slots to fly into Tokyo/Narita which they’ll run from Phoenix . . . eventually. The plan for Tokyo is to start in 2012. Until then, the slot will be subleased back to Delta. They can really start whenever they want, but they figured that it will be 2012 before air travel to Asia has recovered.

And that’s it. No cash changed hands or anything else. It’s just a swap that works for both airlines. This is subject to government approval, and it likely won’t happen until 2010, so transition plans aren’t known just yet.

We also have to talk about Continental and AirTran. AirTran will be pulling out of Newark completely. Its 10 slots will go to Continental. In exchange, AirTran will get what looks to be 6 slots at LaGuardia (for flights to Indy and Orlando) as well as six slots at National (to be used for Orlando and Atlanta). This one makes perfect sense as they play to their strengths. Continental fortifies Newark while AirTran builds in LGA and DCA. AirTran’s service in Newark ends on 10/25 and picks up in DCA/LGA on 11/4.

What a week – my head is spinning.

[Original photos: http://www.flickr.com/photos/tiagochediak/ / CC BY 2.0 and http://www.flickr.com/photos/can10kon10/ / CC BY-SA 2.0]

Yesterday, Southwest finally announced its schedule for New York/LaGuardia beginning June 28, and it’s an interesting one. The slots they acquired from defunct ATA allowing seven daily roundtrips have been split into four daily to Chicago/Midway and three daily to Baltimore. They were also able to add a fifth daily Midway flight by scheduling a late night arrival and early morning departure outside of the slot-controlled time period. But what’s interesting is how these flights are set up. Here’s the schedule:

The only surprise about the Midway flights is that they didn’t schedule more of them. That’s a market that has Delta in there with nine flights a day in direct competition, and there are a ton of flights on American and United into O’Hare as well. With that backdrop, Southwest needed a healthy schedule, and they’ve got one. There are a couple of holes, however, so I would have thought they’d do more, but it does a decent job of covering the business traveler. It will be interesting to see how long Delta sticks with this schedule under the price pressure that Southwest has introduced. Maybe they can sell some of those slots over to Southwest.

The Baltimore flights are a little more interesting. With only three flights a day, that doesn’t appeal to a business traveler at all. Let’s not forget that there are easy train options to run that route as well, so I don’t see this as competitive at all. I assume they did this for the connecting opportunities, and that’s why I thought I’d see something like we see in Dallas where there are plenty of one-stops to major markets, but that’s not what they’ve done.

Everyone is well aware of the operational issues at LaGuardia. Things get jammed up quite easily so Southwest appears to have isolated the airplanes here, at least after they leave LaGuardia.

If you look at my diagram above, you’ll see that six of the eight flights into LaGuardia start somewhere else, and a seventh definitely will be starting its day in Chicago at 640a. But only one of the flights out of LaGuardia goes beyond its next destination, and that’s the first flight in the morning which will probably be reasonably on-time since it will have the whole night to sit before leaving.

Where exactly are those other six airplanes going when they land at Midway and Baltimore? They’ll have to continue on to other places, but I bet they aren’t using the same flight number because they’ve probably built in a pretty big time cushion in Midway before they send them out again. For that reason, they won’t want to sell them as through flights.

It’s an interesting strategy in that it allows them to build a bigger buffer so that planes that are late leaving LaGuardia won’t screw up the rest of the system. But it makes it a harder sell for them to appeal to passengers flying out of New York. There are plenty of nonstop flights on other airlines to many of Southwest’s cities, and now they’ll just show up as connections at the bottom of the heap.

If, however, you assume that Southwest isn’t trying to cater to business travelers in New York but rather those going to New York, then this isn’t that bad of a plan. The flights into New York will show up as direct flights, and they can worry about the return options later. Still, I’m surprised to not see direct options into LaGuardia from strongholds like Houston, Nashville, Denver, and Oakland, among others.

What I think we can all assume is that Southwest isn’t done here. At some point, they’ll get more slots, and they’ll start connecting the dots better, but for now they at least have their foot in the door.