The Department of Transportation (DoT) issued a ruling this afternoon denying the attempt by Delta and US Airways to dictate the terms of landing slot divestitures as part of a mega deal between the two carriers. The initial deal was announced last August, with Delta to gain over 120 slot pairs at LaGuardia and US Airways to gain more than 40 at National Airport in Washington, DC. The DoT had issues with that plan and suggested that the two carriers would need to divest some of those slots to offer other airlines the ability to become more competitive in the NYC and DC markets.
So then, in late March, the two carriers announced a plan to offer a number of slots to competitors. No, they didn’t offer quite as many as the DoT initially requested, but it was pretty close. And the swaps announced did offer a lot of competition. Most notable was the US Airways deal with JetBlue, bringing that carrier into National for the first time. But, in a ruling today, the DoT has stated that the plans drawn up by Delta, US Airways and the other five carriers are insufficient.
Why? Because the slot divestiture was not conducted as a blind auction. In other words, the two carriers should not have been permitted to negotiate with other airlines to get the best deal possible for the slots they are being forced to give up. They must, instead, simply place them up for grabs and hope that the revenue they realize is good enough. Odds are the prices will be similar enough, but it is hard to know for sure.
The other objection, one raised most vocally by Southwest, is that the airlines should not be allowed to choose their competitors. This makes a bit of sense coming from Southwest; they are not shy about their desire to acquire more slots at LaGuardia. But there is also nothing stopping them from pursuing those slots on the open market. If the price is right someone will be willing to sell the slots, right?
And so it is back to the drawing board, and the courthouse. Delta and US Airways have announced their intentions to appeal the ruling.
There are no winners in this decision – consumers lost, communities lost and our employees lost. Even our competitors lost.
Yeah, they’re not too happy about this at all. And I’m guessing that a few others are pretty annoyed, too, including JetBlue. The good news is that JetBlue still has eight slot pairs that it acquired in a deal with American Airlines. But those extra five would have been pretty nice to have.
- jetBlue and American sign interline agreement
- Slot swaps galore, part 2
- Slot swaps galore in New York and Washington, DC
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