Fri, Jul 22, 2011
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.
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