DoT ruling conditionally clears US Airways-Delta trading plan, but justice department flexes its muscles
Two years since first attempting to trade slots at New York LaGuardia and Washington National airports, US Airways and Delta Air Lines are still waiting for US Department of Justice clearance.
The carriers reached a milestone when the Department of Transportation cleared US Airways to transfer 132 slot pairs at LaGuardia to Delta and receive 42 slots pairs at National from the SkyTeam carrier. Delta will also pay US Airways $66.5 million. Part of the DoT approval is dependent on the carriers relinquishing eight slot pairs at National and 16 at LaGuardia.
Shortly after DoT rendered its decision US Airways told employees it was reviewing the slot swap consent order.
The carriers had restructured an earlier slot-swap proposal after the DoT required it to give up a higher number of slots.
DOJ STILL REVIEWING
While DoT has ruled, the justice department is still reviewing the slot deal. It says it is now solely focused on how US Airways' bolstered presence at National airport would affect competition. It says passengers travelling through National pay some of the highest fares in the country.
Data from the DoT's Bureau of Transportation show that for the year to June 2011, US Airways was the largest carrier at National with a 21% market share, ahead Delta with 14%. The DoT is less concerned about competition at National after concluding low-cost carriers "have gained a competitive beach head" at National and LaGuardia "that is not likely to be reclaimed any time soon".
DoT officials are so convinced of ample competition at the airports they dismissed requests from heavy-hitting low-cost carriers Southwest Airlines and JetBlue to require a larger number of slot divestitures from US Airways and Delta. Since the DoT's initial requirement in 2010 that the carriers divest a larger number of slots to push the deal through, the number of low-cost carriers holding slots at National has grown from 3.3% to 8.6%, the agency says, which exceeds the 6.5% the DoT sought to establish in its requirements during 2010. The agency also rejected Southwest's arguments that approving the slot swap would create inefficiencies in slot use at the hub airports.
The justice department revealed no time-frame for its review of the deal but it issued a strong clarification of its authority. "Under the antitrust laws the division can, and will, take appropriate action, if warranted, at the conclusion of its investigation."