The details are out. Now that the feds have finally paved the way for the Delta/US Airways slot swap (at least this part of it), Delta can finally roll out its plans to dominate New York. This is far from just replacing US Airways on existing flights but is rather a much broader shift.

There’s great news for people in bigger cities, primarily other hubs. Delta will be providing some competition there that didn’t exist before. But that growth means someone else loses, and it’s primarily smaller cities. This isn’t really a surprise, but it’s going to make people pretty unhappy that need those routes. Ultimately, these can be divided into four different categories. Let’s go through each of them.

Big Cities, Big Winners
What Delta is really trying to do here is offer frequent nonstop service in top business markets. That’s good for travelers but not for other airlines. The biggest likely loser? American.

Of these 14 cities, American serves five of them nonstop, so it won’t be happy. As if that’s not bad enough, Delta’s new flights to Halifax will certainly pull from JFK, where American operates the only nonstop flights to Halifax today. For two cities, Nassau and Halifax, this will be the only nonstop flights in the markets, so they’re just going to be happy in general.

You’ll notice that Halifax, Montreal, and Ottawa all are getting service but Toronto is not. Seems strange, right . . . oh wait not so much. Remember, some of those divested slots went to WestJet, and the expectation is that most if not all will fly to Toronto. Oh, and did I mention that Delta and WestJet are planning to codeshare? Not so much of a divestment, eh? Here’s the list of winners.

A Little Bit of Growth
Those markets above aren’t the only winners. Others will actually see some growth or at least stay the same. These fall into a couple different categories.

Most of them are markets that are already served by Delta today but aren’t served by US Airways. In these, Delta is adding an additional flight, so it’s all good news for this group.

There are two that don’t fall into that category. Washington/Dulles will see its 4 daily US Airways flights replaced with 4 new flights from Delta. That might seem like a wash, but US Airways loyalists could always fly United before and can continue to do so and still earn miles. Delta brings convenience to its loyalists, so it provides better utility. Also, some will be happy to see jets replacing turboprops, but that doesn’t matter to me.

The last one is a special case. The 4 daily US Airways flights to Syracuse will be replaced by 5 from Delta. Not bad, but why is this happening? Delta has been particularly careful to court the New York politicians in this process. That relationship has helped open plenty of doors, so those upstate New York markets will be taken care of quite nicely. Here’s the list:

Just a Haircut
Now it’s time to start talking about the losers, but let’s ease into it by talking about those with pretty mild losses to start.

In this group there are really two types of cities. The first group loses the least. These are cities that have US Airways service today but no Delta service. The US Airways flights will disappear and Delta will step in, just with fewer frequencies. These cities get “upgraded” to jets, and they’ll have at least two flights a day. So, there is a loss in terms of the number of flights but it’s pretty minor.

The other group will be less happy. These are cities that had both US Airways and Delta service before, but they’ll now be losing US Airways completely. In return, these cities will get more flights from Delta, but not enough to replace what was lost by US Airways. It also means there’s one less competitor in the market. Here’s the full list:

Little Cities, Big Losers
It’s time to talk about the bad news. There are some cities that are just getting wrecked here. In general, the plan is this. These cities have service from US Airways today and that’s all going away. Delta’s either not coming to these cities or it’s adding a single, measly flight.

Basically, it sucks if you need to go between these cities and New York because your options are greatly reduced. There is one in this list that’s not like the others. That is Baltimore. Delta has declined to go into that market, and I know why. Southwest is the only other airline in the market. So people who need to fly between New York and Baltimore still have an option, but Southwest only has 3 flights in there. US Airways has 7 flights that are going away, so this market is taking a big hit. It’s just not as bad as those markets that lose absolutely everything. Here’s the list:

As you can see, there are some winners and some losers here. In general, the little cities are the odd men out, but many smaller cities do retain at least some service. It’s completely clear why Delta is doing this. It wants to make its slots at La Guardia as useful as possible, and that means serving larger markets. Delta is also upping its game at JFK (I wasn’t able to get the full details on that one yet), which will really make it so that Delta can adequately get anyone in New York to just about anywhere they need to go.

As I said above, this hurts American the most. American now becomes an even more distant third place in New York, and that’s even if you count JetBlue as its partner. For Delta, this is a smart way to use the slots. Of course, I say that as someone who doesn’t have to travel to Ithaca or Providence.

Remember that whole Delta/US Airways slot swap deal? US Airways gave most of its slots at New York’s La Guardia airport to Delta in exchange for most of Delta’s slots at Washington’s National Airport along with a couple of other considerations. As part of that, Delta had to put 24 slot pairs up to auction for new entrants. That happened last week, and now, we know the winners . . . sort of.

At La Guardia, there were two bundles of 8 slot pairs being auctioned off. That means that two airlines will get the right to operate 8 takeoffs and 8 landings per day at good times. The bidders had to be either new entrants or airlines with very small presences at the airport already. One of the winners has been officially announced . . . WestJet.

That’s right. Those crazy Canucks are swooping in to fly 8 daily trips to La Guardia. It’s not a surprise that WestJet was interested. The rumors were that WestJet’s proposed partnership with Southwest ended over something closely related to La Guardia. See, WestJet wanted to be able to partner with multiple airlines in order to help feed its network. This was important at La Guardia, where Southwest couldn’t add much. Southwest supposedly didn’t want to see WestJet partner with anyone else. The partnership ended so that WestJet would be free to pursue a life of religious fulfillment, er, um, multiple partnerships.

Earlier this year, Delta launched an interline partnership with WestJet. I imagine we might see it get a little cozier now that Delta will have so many flights that could feed WestJet. Someone is going to need to fill those 8 flights, most if not all of which are undoubtedly bound for Toronto.

But what about the other eight? That’s a bit more of a mystery. Though it hasn’t officially been announced, Bloomberg reports that JetBlue won that bid. It also is said to have picked up the 8 slot pairs down at Washington/National as well. That’s a big win for the Blue Crew.

JetBlue’s interest should be no surprise. It already runs just shy of a dozen daily flights out of La Guardia to Ft Lauderdale, Orlando, and West Palm Beach. At National, it has nine with flights to Boston, Ft Lauderdale, and Orlando. This will help the airline expand its reach at those airports with a nice chunk of new slots.

So is anything surprising about this whole thing? You bet. The most surprising thing is that Southwest didn’t win anything. It has a gajillion* dollars in the bank (*rough estimate) and certainly could have outbid anyone if it wanted. It has made serving big cities a priority lately as a way to get its customers wherever they need to go in the US.

Southwest fought its way into La Guardia when it got 8 slot pairs there to start flights to Baltimore and Chicago. It gained more when it acquired AirTran, which has about 20 slot pairs. It acquired its first beachhead at National with AirTran’s 12 slots there. So you would think it would have been hungry for more, and in fact, it has expressed great interest in the past. It just somehow got outbid this time.

So, Southwest fans won’t be thrilled, but JetBlue lovers should be. There will be more JetBlue flights coming soon, assuming the deal gets done. And Canadians can rejoice that they will have another option to get to New York.

Now we just have to wait for all the “i’s” to be dotted and “t’s” crossed. Oh yeah, and we’re still waiting for final governmental approval in a couple areas. But things are starting to shape up nicely.

If you want to follow this closely, head on over to Things in the Sky. Dan Webb is keeping a close eye on this.

[Original photo via Flickr user Bob n Renee/CC 2.0]

After years of back and forth, the Department of Transportation has finally decided to do the right thing and let US Airways trade a host of slots at New York’s La Guardia for a bunch of Delta’s slots at Washington National Airport. This swap is not a simple transaction. There are a lot of logistics behind it, and it took major creativity and commitment from both parties to make something like this work. Hopefully American is taking notice. And I say that not because Delta has made a move that will once again hurt American in New York, but rather because American needs to get off its butt and start doing some bold things like this to fix its business.

After last week’s post on American’s decision to order 460 new airplanes, I had some great offline conversations with people about it. I still stand by my belief that it was a good move. I have no doubt American beat up the manufacturers to get a great deal, and it will certainly help to lower operating costs when the airplanes start coming in, probably at little to no additional cost to American. But that doesn’t mean that American’s problems are solved. If American thinks this is the solution, and I really can’t imagine that’s the case, then the airline is screwed. This doesn’t touch American’s revenue problems at all.

The news that Delta and US Airways received approval of the slot swap provids a great contrast between Delta/US Airways and American. Delta and US Airways have been very proactive at doing the right thing and improving their respective businesses. For US Airways, it’s been all about focusing the business on reliability, convenience, and appearance while re-forming the route network to fit its strengths. US Airways shut down the money-losing Vegas operation. It got rid of all the non-hub flying on the east coast that was a drain. It cleaned up its airplanes, and focused on on time performance. And now, it’s ditched its turboprop-based hub at La Guardia in favor of strengthening its position at Washington’s National Airport where it’s a much stronger player and can draw better revenue.

For Delta, the change has been no less significant. It has pulled down flying at minor hubs like Cincinnati and more recently Memphis. It’s parking smaller airplanes and cutting service to small cities that simply aren’t profitable. The airline built up a more comprehensive premium product and has worked on setting product standards from its 70 seaters on up. It has positioned itself as a technology leader in a variety of ways, and it has worked hard to improve the airport experience. Now, it can trade its Washington position in order to strengthen its already strong capabilities in New York.

For both US Airways and Delta, this is yet another effort to play to their strengths, and it’s going to provide a great deal of benefit to both. Let’s contrast that with American.

Instead of doing hard work on its own, American is relying on partners to fix its problems. It has put its eggs in the joint venture basket – saying that its partnerships with British Airways/Iberia as well as with Japan Air Lines will spike revenues. It’s built up a partnership with JetBlue to feed its flights in New York and Boston. That’s nice, but it doesn’t fix the structural problems. It’s just a patch.

If you didn’t see the investor report issued by Bob McAdoo back in May, then you missed out on a scathing review. Bob noted some very simple things, like the fact that American’s 10 worst routes lose about $450 million a year, more now that oil has spiked. He uses Chicago to London as an example. American gets a much lower fare than United but it flies larger airplanes and has more frequencies. The same goes from JFK to LA and San Francisco. The average fare to LA has dropped over $100 since 2000 but the level of service stays the same, losing money all along the way.

Instead of addressing these big problems, American pokes around the edges. Sure, it made some moves, like slowly killing the San Juan hub, and cutting some vestigial flying, but it’s been mostly minor changes. It stops flying routes like San Francisco to Honolulu and starts flying to Helsinki and calls that a strategy. (This week, it’s building up Ft Lauderdale a little. Woohoo.) It has its cornerstone strategy of focusing on LA, Dallas, Chicago, New York, and Miami. That’s fine. But instead of just culling service around those cities, it seems the problem is how American serves those cities in the first place, at least that’s what the McAdoo report makes very clear. Then there’s New York. Delta has made huge strides in New York, and it will now have a ton of new service from La Guardia to offer up to its corporate clients. American stands still.

It’s not just the route network but the onboard product as well. The most glaring deficiency is that American is the only long haul domestic airline without a plan for flat beds in business class. It rolled out its substandard business class about the time United went fully flat, so it was obsolete from the start, and nothing has changed. Even US Airways has been actively rolling out flat beds.

Even when American has been a leader, it’s quickly fallen behind. It was an early adopter of gogo inflight internet, but it only put it on a limited portion of the fleet. While Delta put it everywhere, American stuttered and is only now catching up. Hopefully some of its more forward-thinking moves, like working on streaming video with gogo will actually go past the testing stage and give the airline a leadership position in . . . something.

I’m sure many of you will say a merger is the answer, but it’s most definitely not. American’s costs are higher than any potential merger partner, so it would effectively kill an airline that works well today on its own. The math becomes 1+1=0.5 if they were to do an ill-advised combo. So the weight falls squarely on American to do the hard work. It has spent a lot of time raising cash, but it keeps losing money while others profit. Instead of slowly bleeding cash, American needs to invest that money into fixing its problems.

The airline might want to take a hint from its partner Qantas, which is about to make some major changes on August 24 in order to get its house in order. Will these be popular? Not all, but that’s not the point. The point is turning the business around at all costs.

Get bold, American. Do something to get those revenues jumping.

Delta and US Airways are hoping that the third time’s a charm by putting the long-proposed slot swap in New York and Washington back on the table with some slight modifications. This time, I have to believe that it’s going to go through. They wouldn’t bother putting this out there if it was going to fail once again.

Here’s the plan this time around:

US Airways no longer wants the Japan slots it had wanted before, mostly because there is now an open skies agreement between the two countries and it doesn’t need to buy them. It also will no longer give up its terminal location in LaGuardia as before. Delta will get a few more slots in the deal, and US Airways gets a bunch of cash. Here’s the full rundown depending upon where you live:

For Washingtonians

• Delta will give 42 slot pairs (1 slot pair = 1 departure + 1 arrival) to US Airways at National and US Airways will begin service to at least 15 new destinations. Back when US Airways first announced it would do this deal in 2009, it gave 15 new destinations it would serve, so I imagine it will be similar.
• Delta will continue to serve its 7 (!) domestic hubs from National – which I assume are New York/JFK, Atlanta, Memphis, Detroit, Minneapolis/St Paul, Cincinnati, and Salt Lake City along with the shuttle to LaGuardia and some “select” cities, whatever that means. Delta never gave us any inkling before, so we can only guess now.
• This is pure speculation, but I would assume that US Airways will acquire more gates on the middle pier at National which would allow United to move to some old Delta gates on the south pier to be right next to Continental.
• If needed, Delta will give an additional 8 slot pairs to be divested for use by airlines with limited or no service at National. US Airways would still end up with 42 new slot pairs regardless. I assume the feds will make this a requirement.

For New Yorkers

• Delta will get a whopping 132 new slot pairs (up from the 125 in the first dealin the last deal, Delta would buy 125 but lease another 15 with the option to buy, so this is actually a decrease) at LaGuardia. We have no clue where they’ll go, but we can expect to see Delta replace US Airways on many of the airline’s current routes. Delta also says it will double the number of total destinations it serves, including some that aren’t currently served by US Airways.
• Delta will use an all-jet fleet at LaGuardia instead of the turboprops that US Airways currently uses. Wanna guess where those jets are coming from? My guess is the obvious. (*cough*Memphis*cough*Cincinnati*cough*)
• US Airways will give up 18 of the 20 gates in its terminal at LaGuardia (called Terminal C) to Delta. Delta will use those plus 11 in its current terminal (now Terminal D) for 29 in total. Delta will then build a connector between the two terminals so that it can operate as a single terminal from a passenger perspective. (They aren’t physically connected now.)
• Delta will continue to run the Shuttle from LaGuardia to Boston and Washington from six gates in the Marine Air Terminal, which is a change from the previous plan to consolidate in one place.
• US Airways will still have two gates in LaGuardia’s Terminal C along with 7 other parking spots from where it will run its operation have 6 gates once the terminal is reconfigured to add more spots plus 3 parking positions for regional jets. It will continue to have the Shuttle to Washington and Boston along with flights to Philly, Charlotte, and Pittsburgh but that’s it. The previous plan to keep Wilmington (who knows why) won’t happen.
• Delta will take over the current US Airways Club at LaGuardia in Terminal C and turn it into a Sky Club to complement the existing club in Terminal D. US Airways will build a new, smaller lounge for its operation.
• Delta (not US Airways) will give up 16 slot pairs at LaGuardia to new entrants if needed, and you can bet that will be the case.

On top of all this, US Airways will get a slot to fly to Sao Paulo in 2015, which is on top of another slot it already has acquired on its own. As mentioned above, the Tokyo slot that was previously included is gone since Japan and the US now have open skies. To make everything work out after these changes, Delta will drop $66.5 million into a US Airways bank account.

So why do I say this is a done deal? Because it has to be. US Airways and Delta had filed an appeal in the courts to force the feds to allow this to happen. As part of this new deal, the airlines are dropping the appeal. There has to have been a lot of backroom bargaining here. The feds must have given the green light behind the scenes or these airlines wouldn’t have bothered making another proposal. To me, the only question is who will get those divested slots and will the full amount be required.

As Delta and US Airways both make clear, things have changed a lot since the swap was first proposed nearly two years ago. Southwest has gone into LaGuardia on its own and its purchase of AirTran gives it more slots there as well as some at National for the first time. JetBlue has found its own way into National as well. So there is a lot more low cost airline penetration and connectivity to the rest of the country. It should be enough.

I’m actually surprised that Delta is willing to pony up 24 slots just to appease the feds here. But Delta has been foaming at the mouth around cementing its role in New York and this would be a huge step forward. It would also be a major slap at American. The new United and Delta will be the two biggest players in the New York area and American will have to figure out how it wants to respond, if it does at all.

I still like this swap a lot, and I think it should have been approved two years ago. Let’s hope that this is effectively a done deal at this point.

Updated 5/26 @ 1009a to reflect that I forgot about the previous deal to lease 15 slots to Delta at LaGuardia. Also received clarification from US Airways that the terminal will be reconfigured and it will still have 6 gates plus 3 parking positions at LaGuardia.

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.