Regulators reject modified slot deal between Delta and US Airways

Washington DC
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Delta Air Lines and US Airways have failed in their attempt to convince regulators to approve a modified slot swap deal at Washington National and LaGuardia airport in New York.

The drawn-out process began in August 2009 when the two carriers announced a strategic swap that entailed US Airways agreeing to transfer 125 pairs of its Express slots at New York's LaGuardia airport to Delta, which would result in Delta transitioning the airport into a hub. In turn, Delta agreed to transfer 42 pairs of its slots at Washington National airport to US Airways.

A slot pair equals one roundtrip flight.

US regulators in February of this year issued a tentative approval that required the carriers to divest 14 slot pairs at Washington National and 20 at LaGuardia to incumbent or new entrant carriers to strengthen competition at the airports to offset potential harm caused by the proposed transaction.

In a modified proposal Delta and US Airways agreed to transfer 12% of takeoff and landing slots in the proposed swap to AirTran, JetBlue, Spirit and WestJet. Delta agreed to transfer five slot pairs each to AirTran, Spirit and WestJet at LaGuardia while US Airways committed to transferring 4.5 pairs of Washington National slots to JetBlue.

DOT has not budged from its original determination, reiterating today that the carriers must divest 14 pairs of slots at National and 20 at LaGuardia, and sell them through a blind sale to airlines that have little or no service at the 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," the department states.

Southwest Airlines, who has a keen interest in expanding at LaGuardia and serving National, claimed the original slot swap proposal was anti-competitive, and also argued the only way to ensure divested slots guaranteed maximum competitive benefit was to use a transparent, cash only auction for their sale.

Southwest contended that if Delta and US Airways were given discretion to select buyers of divested slots, the carriers could distribute the slots among many different acquirers to prevent any single carrier from building a competitive presence as the airports.

DOT states its final decision incorporates most of the major elements from its tentative approval issued in February. At that time Delta and US Airways threatened to abandon the deal altogether if those conditions were imposed.

A spokesman for US Airways says the carrier is disappointed by the DOT's final ruling, and the airline is reviewing the regulator's decision.