US Airways, Delta Reach New Slots Pact

US Airways and Delta Air Lines recently announced a revised agreement to transfer takeoff and landing rights at New York’s LaGuardia and Washington’s Reagan National airports. The revised agreement, filed with the FAA on May 23, revises a previous transaction agreed between both carriers and approved by the Transportation Department, but under terms not acceptable to either US Airways or Delta.

In 2009, US Airways and Delta filed a joint petition with the FAA requesting a waiver from the prohibition against purchasing or selling slots at LaGuardia to allow the sale of 125 pairs of slots. The original proposal entailed Delta transferring 42 pairs of slot in Washington, along with international route authority for Sao Paulo, Brazil and Tokyo Narita, Japan and space at the LaGuardia Marine Air Terminal to US Airways in exchange for the 125 slot pairs and agreement to lease an additional 15 pairs with options for purchase.

Although FAA granted the waiver in February 2010, it also required 20 of the New York pairs and 14 of the Washington pairs to be sold to airlines with no or limited service at the two airports. Specifically, Delta and US Airways would have been required to sell the slots in a blind auction to U.S. and Canadian airlines with less than 5 percent market share at the airports. If any of the slots were not sold, they would revert to FAA to be reallocated response.

In response, Delta and US Airways submitted a proposal to FAA to transfer five pairs of slots each at LaGuardia to AirTran Airways, Spirit Airlines and WestJet and five pairs of slots at Reagan to JetBlue Airways. However, FAA did not accept the counterproposal and on May 11, issued an order reaffirming its original position, rejecting the airlines’ counterproposal. In response, the airlines stated that they would not pursue the slot transfer and ultimately filed an appeal with the U.S. Court of Appeals in Washington, D.C.

Under the latest agreement, announced on May 23, Delta would acquire 132 slot pairs at LaGuardia from US Airways and US Airways would acquire from Delta 42 slot pairs at Reagan, the rights to operate additional daily service to Sao Paulo in 2015, and Delta would pay $66.5 million in cash. In addition, the transaction could result in the divestiture of up to 16 slot pairs in New York and 8 slot pairs in Washington to airlines with limited or no service at those airports. With this latest agreement, both Delta and US Airways have dismissed their appeal in hoping to clear the way for DOT to consider the revised application.

Both Delta and US Airways note the competitive landscape in both cities has changed significantly since the transaction was first proposed in 2009. New entrants and smaller carriers, including AirTran Airways, JetBlue Airways and Southwest Airlines have gained considerable access to slots at both airports and expanded service at these and other airports in the greater New York and Washington metropolitan regions. The approved mergers between United and Continental and Southwest and AirTran have also sharpened competition on the East Coast.

The completion of the revised agreement awaits government and regulatory approval.