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US Airways-Delta Deal

Delta and US Airways trying to salvage their deal

Dawn Gilbertson  Mar 24, 2010

US Airways and Delta Air Lines, trying to salvage a 7-month-old deal to swap takeoff and landing rights in Washington, D.C., and New York, have agreed to sell a fraction of the rights to smaller competitors.

The agreements with AirTran Airways, Spirit Airlines, WestJet and JetBlue, announced late Monday, are designed to satisfy federal regulators' concerns that the so-called slot swap could hurt consumers by reducing competition at the airports.

The U.S. Department of Transportation last month approved the deal on the condition that Tempe-based US Airways divest 14 of the 42 slot pairs it would receive from Delta at Reagan National Airport and that Delta divest 20 of the 125 slot pairs it would receive from US Airways at New York's LaGuardia Airport. Slots are takeoff and landing rights used at ultra-congested airports.

Executives from both airlines said the deal would not go forward under those conditions.

US Airways President Scott Kirby said in a memo to employees Monday that the DOT's ruling forcing the divestitures of valuable slots is "legally questionable" but that fighting it would be costly. He reiterated the airline's earlier comments that growing in Washington and shrinking in LaGuardia will strengthen its operations and finances. Delta, in turn, wants to beef up in New York.

The big questions now: Will Monday's proposed divestitures, less than the government is proposing, be enough?

And will Southwest Airlines, which wants to grow at LaGuardia but isn't part of the US Airways/Delta deal by design, play the spoiler?

Dallas-based Southwest, a US Airways rival, blasted the initial deal and said Monday that US Airways and Delta can't hand-pick their competitors.

In the proposal announced Monday, US Airways and Delta will transfer fewer slots to the four airlines than the DOT required in its ruling. They are proposing to divest a combined 12 percent of the slots, compared with 20 percent in the government's ruling.

US Airways said it will transfer to JetBlue up to five of the 42 slots pairs it receives from Delta in Washington, vs. 12 in the DOT's ruling.

In New York, Delta said it will transfer five slot pairs each to AirTran, Spirit and WestJet, for a total of 15 of the 125 instead of the 20 proposed by the DOT.

Airline industry consultant Robert Mann, of R.W. Mann & Co. in New York, said the Washington divestitures likely won't be sufficient for regulators but that the LaGuardia plans are close to the DOT's demands.

After their initial shock at the government's ruling, Mann said "cooler heads prevailed" at US Airways and Delta as they realized the slot swap is still valuable even with some divestitures.

"It just makes a lot of sense," he said.

Especially, he said, if you can divest them to anybody but rival Southwest Airlines, which has begun serving major East Coast airports, including LaGuardia, it steered clear of in the past.

"I noticed an airline name that wasn't invited to the party," Mann said. "I think it's called keep-away."

Southwest is incensed.

"It is not up to US Airways and Delta to unilaterally decide how public assets such as valuable airport slots are put into use to serve consumers, and this new proposal does not alleviate the highly anticompetitive nature of the original Delta-US Airways agreement," the airline said in a statement.

Southwest wants regulators to reopen the proceeding and to permit additional comments on the airlines' latest proposal.

Delta and US Airways trying to salvage their deal
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