Delta and US Airways engage in slot swap shenanigans

by Charlie Leocha on March 25, 2010


Last August, Delta Air Lines and US Airways proposed a swap of arrival and departure slots between Reagan National Airport in Washington, DC, and LaGuardia Airport, in New York City. This swap would concentrate each of the airlines’ schedules — US Air would gain more gravitas at Reagan National and Delta could build up their service at LaGuardia in New York.

After a back and forth with the FAA, Delta and US Airways have issued a counterproposal to the FAA’s conditions for this swap. It doesn’t protect consumers’ interests.

Initially, newspapers were full of articles about how this deal would affect the two airlines and other competing airlines. No one was concerned about how this proposed swap would affect competition and ultimately, consumers.

The Consumer Travel Alliance (CTA) at that time sent a direct email to the FAA office that was charged with reviewing the slot swaps. In their letter, the CTA urged the department to take into consideration competitive concerns and look at this transaction from the point of view of the airline consumers.

These slot machinations should also be examined in light of how airline alliances are using their ability to cobrand flights as a means to claim equal service while actually reducing flights. We need to keep in mind that the airlines have no antitrust immunity when it comes to domestic operations.

I urge you to keep passengers in mind as this decision moves forward. The media, to this point has only examined the benefits these swaps will bring to the airlines. Consumers have been forgotten. I trust that the FAA deliberations will include a close look at how these proposed changes impact the flying public.

The FAA evidently agreed and restricted the slot swap between Delta and US Airways, forcing them to divest themselves of other slots should they desire to consummate this deal.

At the last minute as comments on the proposed decision closed earlier this week, Delta Air Lines and US Airways responded with a counter proposal. They agreed to sell a reduced number of slots and proposed that DOT allow Delta and USAir to select the airlines to whom they would sell their landing and take-off rights.

In other words, Delta and USAir wanted to make sure that no airline that may seriously compete with them would be able to purchase the slots that they would have to abandon should the slot swap be permitted.

Here’s the slot swap timetable
In the original Delta/USAir August 2009 proposal, Delta would pick up 125 slot pairs at LaGuardia and US Airways gain 42 slot pairs at National.

In February 2010, FAA noting the airport dominance of the two carriers, ruled that 14 slots at National and 20 at LaGuardia would have to be divested if the proposal was going to be approved. Under the FAA ruling US Airways would control just over 50 percent of Reagan-National flights and Delta would be limited to 45.3 percent of LaGuardia operations.

Last Monday (March 22) Delta/USAir made a counter offer to the FAA. They are not proposing that they divest themselves of fewer slots and that they be allowed to hand pick which airlines will be able to purchase the slots, rather than opening slot sales to auction.

According to this scheme, Delta would pick up 110 slot pairs at LaGuardia, but give up five slot pairs apiece to AirTran, Spirit and WestJet. US Airways, meanwhile, would get to keep 37 new slot pairs at National, giving five slot pairs to JetBlue.

Should airlines control a public asset?
On principal, the FAA should not allow this kind of wheeling and dealing between airlines to usurp their slot control authority. These slots are a public asset, not the property of the airlines. Though I personally like the proposed presence of JetBlue at Reagan-National Airport, I would also like to see Southwest have a presence or at least the opportunity to bid for slots at both Reagan-National and LaGuardia rather than have theses slots divided up behind closed doors.

The Consumer Travel Alliance filed a comment supporting the position of Southwest Airlines, that negotiations regarding the slot swap should be reopened and subject to auction.

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  • john

    Charlie,
    You and I disagree yet again. While I agree in principle that neither airline should be allowed to dominate either airport (I live near Cincinnati and can see all of the bad things that occur when that happens), I don’t agree with the control of the public asset paragraph. It is my understanding that both airlines paid for their landing slots and in doing so made an investment in an asset (we can argue if its owned or leased). I don’t agree that the airlines should now have to walk away from that investment and receive no value for the appreciation that has occured.

    Can we meet in the middle? How about the airlines have to auction the landing slots to the highest bidder where neither of them could bid. All money obtained would go back to the airline.

  • http://www.tripso.com/author/leocha Charlie Leocha

    I’m fine with meeting in the middle, but I don’t think the landing slots in all cases are paid for by the airlines. Let me look into this.

  • john

    Charlie … They they didn’t pay for the slots initially then my opinion changes and I, for once, agree with you. There’s no reason for the airlines to profit from something that the government gave them.

  • Frank

    They’ve paid MILLIONS and MILLIONS for those slots.

  • Jerry

    The whole slot thing is a mess. However, does the consumer benefit at all with the status quo? No. We all know both Delta and US Airways do not want to compete with Southwest. But since Air Tran, Jet Blue and WestJet all operate very similar to Southwest, then there will be some competition. I believe the modified proposal should go forth. The consumer will be better off with it.

  • http://www.tripso.com/author/leocha Charlie Leocha

    As I mentioned in the article, I’m torn. I would love to have JetBlue service, too. However, with a system built on precedent, it is bad precedent to allow the airlines to choose to whom they will sell. The FAA should stay in control as much as possible.

  • http://www.tripso.com/author/leocha Charlie Leocha

    Just to set the record straight. I just got off the phone with the FAA. The airlines have never paid for their slots. These slots were handed out for free by the FAA over the years based on flight availability and airport capacity. Many airports have no capacity controls.

    The only airports with controlled slots presently are LGA, JFK, EWR, ORD and DCA. None of the airlines that have slots paid anything for the initial slots. Most of the slots were allocated by a lottery system during the 80s and 90s. However, the airlines hold the slots on their books as assets.

    These airports are controlled because the airlines can not control themselves and would schedule 100 or more flights an hour when the airport has a capacity of only 80 flights per hour.

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  • Frank

    interesting. Soooo, Southwest would get those slots for free? Better call the FAA again. Charlie.

    Another site with the same discussion: http://airlineforums.com/topic/48543-usdl-lgadca-slot-swap-deal/page__st__27

  • Bon’Fire

    No, they didn’t pay millions and millions of dollar for those slots. They paid legal lobbyists millions and millions of dollars to prevent JetBlue from acquiring slots. Competition is good for everyone and monopoly spells antitrust.

  • Frank

    Bon’Fire March 28, 2010 at 1:56 pm
    No, they didn’t pay millions and millions of dollar for those slots. They paid legal lobbyists millions and millions of dollars to prevent JetBlue from acquiring slots. Competition is good for everyone and monopoly spells antitrust.
    ==================================================

    Bon Fire, NEWSFLASH…………………………..JETBLUE, didnt exist IN THE SHUTTLE MARKET when LCC gained those slots. TRY AGAIN, They got those SLOTS via Trump.

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