Divesting Slots To Low-Cost Carriers Is Still Necessary

The U.S. Department of Transportation is proposing to allow Delta Air Lines and US Airways to exchange some of their operating rights at Reagan Washington National Airport and New York's LaGuardia Airport, subject to a number of conditions.

The Department is asking for public comment on its proposal to allow the carriers to exchange takeoff and landing rights at the two airports. Approval of the transaction is subject to a number of conditions designed to protect consumers, principally that the carriers divest themselves of eight pairs of daily slots at Reagan National and 16 pairs at LaGuardia, and that they complete the transaction in phases. A “slot” refers to an air carrier’s authority to take off or land at an airport where flight operations are limited by the Federal Aviation Administration. Both conditions are being proposed in order to promote competition at the airports.

In 2009, the two carriers requested approval for a similar slot swap transaction at the two airports. However, the Department said it would allow the swap only on the condition that the carriers divest themselves of 14 pairs of daily slots at Reagan National and 20 pairs at LaGuardia, in order to reduce the impact on competition and provide more opportunities for new-entrant carriers at the airports. The carriers did not proceed with that transaction, but instead submitted a revised proposal to the Department on May 23, 2011, which included Delta’s transferring 42 slot pairs at Reagan National for 132 US Airways slot pairs at LaGuardia. The carriers offered to divest some slots as an alternative to their argument that no divestiture should be required.

In tentatively approving the new proposal, the Department noted that recent events had resulted in an increased presence of low-cost carriers at the two airports, but that divesting slots to new entrants or low-cost carriers would still be necessary to reduce the prospects for competitive harm. The Department also found that other potential benefits could arise from the swap, such as enhanced service benefits to passengers and a more efficient use of slots at the airports.

If today’s decision is made final, the carriers would be required to sell eight slot pairs at Reagan National and 16 slot pairs at LaGuardia through a blind sale to airlines that currently have little or no service at these airports. Slot pairs would be sold in bundles large enough to ensure that a purchaser would have a sufficient number of slots to provide meaningful new competition. In addition, Delta and US Airways would be required to wait 90 days before beginning their new operations on a phased-in basis, in order to allow the new services to establish a foothold at the airports.

Comments on the Department’s proposed decision are due in 30 days.

FMI: www.regulations.gov/search/Regs/home.html#docketDetail?R=FAA-2010-0109