DCA Hub

[john john]

With the Department of Justice (DOJ) concerns on DCA airport competitive effects on domestic competition, I was wondering if US Airways/American Airlines has adjusted their position on retaining the US Airways and American Airlines DCA slots.

Ask Sam or Cheri or Trisha or Jack and Frank

 

[WorldTraveler]

So with CO side deal at EWR in the UA/CO merger and 18 UA slots CO propose the deal.

Then US should be allow to propose a agreement, with say RJET, RW unit for American's slot holdings, say 100 takeoff and landing slots and the two companies agree to a JV concerning all of the DCA slots that are operated by MQ and RW that has a CPA with US. And the new American develop a new CPA with MQ after their propose spinoff from AMR and new American develop a new CPA with RW under the agreement with US for the total DCA operation.

US/AA should also have the options to lease back 50% of the said slots for future development for main line operation.

not sure I totally follow but if the DOT-DOJ says the slots need to be divested, then those slots will not be available to be used for any type of benefit by new AA whether in na RJ operation or not.

If the slots are divested the chances are high that a portion of them will be won by either WN or B6 who are direct competitors to AA and US, even if some AA employees seem to think that B6 is a friend.

But it is also very much true that if the requirement is to preserve service to small cities, then the network carriers have an advantage since they are the ones that operate most small aircraft - although it is very possible that regional carriers could do it on a standalone basis - but at a great distance from new AA.

 

[star power]

There is a very good chance that such a rumor is indeed accurate.

New AA should be fully capable of garnering 50% of the DCA market with the 55% of the slots that US has right now but the cost will be to the small cities US serves from DCA and those where US' presence is so small to not have a meaningful difference in the amount of traffic carried. Despite the political influence those small cities might have, there is a limit in the size of AA/US' operation at DCA that DOT/DOJ will enforce. Parker is trying to push the number of slots he can retain but ultimately AA/US will have to divest.

It is also noteworthy that the Brazil route case in which both AA and US are asking for access - along with DL - has also ground to a halt. It would appear that the DOJ and DOT are not going to move forward with the Brazil route case knowing that AA/US will be approved with conditions; giving even half of the new frequencies to AA/US who already combined control more than half of all US carrier slots at GRU is simply not going to happen anymore than AA/US will retain all of its current DCA slots.

It isn't a given that other legacy carriers will be excluded from the process, esp. if they can help connect cities that otherwise would lose service or which low fare carriers wouldn't serve. MIA might be a very good example.

AA/US has the choice to part with a smaller number of slots at DCA in a manner in which they have control and can pick the outcome or they can be forced to divest slots in a manner in which a much lower CASM carrier such as B6 or perhaps WN gains a high percentage of the divested slots and thus have a greater economic impact on new AA's ability to compete at DCA.

The more slots AA/US retains at DCA, the greater the likelihood that the DOT/DOJ will dictate the terms of divestiture and make it a blind transaction such that AA/US have no control over who gains the divested slots.

It is also possible that some of the slots will be placed into a pool that can only be reallocated for small town service, eliminating the argument that low fare carriers will just transfer the slots to serve large markets. And of course, the last thing Parker wants is low fare carriers in AA/US' primary markets at DCA. The DOT/DOJ is just as interested in making sure that big markets have meaningful competition to keep the prices down as they are in making sure that small towns are served. The recent WN route case shows that the size of the awarded market - Houston - was very significant in the route case.

Given that B6 and WN both have enormous potential to build out their route systems at DCA and connect them to other key points on their route systems, the chances are very high that AA/US will both lose some of the small town frequencies they have plus see increased competition on some of their biggest routes.

The DCA and Brazil route cases are probably indeed connected and might also include other merger-related transactions including terminals at US airports and slots at other airports around the world.

It is doubtful that new AA would be forced to reduce its slot holdings down a level that would allow them to operate on one concourse so the connection between the two concourses is still a genuine concern.
The issue with a regional terminal will be the same; unless it is physically connected to the existing concourses behind security, there will still be bussing which involves higher costs and a perception of a less convenient hub.

WT, you are probability correct with DOT thought process.

Since the CAB set the perimeter rule in place in 1966 at 650 sm and the DOT extend it to 1000 sm in 1981 and then change it again 1987 to 1250 sm. the CAB also set the HDR of 60 planes per hour in 1966 with 37 air carriers, 11 commuters, and 12 for general aviation, but in 2001 the general aviation have been restricted. so since 1981 the DOT has reaffirmed the CAB decision on the HDR even to the Air 21 agreements of 2011.

I would think that if the DOT wants more air carrier slots per hour they should reduce the commuter service, but I don't think the US Congress would allow them without a fight, so there is value in the commuter sector but not as much as the air carrier sector.

 

[WorldTraveler]

In practice, there really isn't a distinction anymore between the types of slots which is why the only viable way Congress has to increase small city access to DC is to allocate certain slots for small towns.

Speaking of which, how many of those types of slots does US (or its regional carrier affiliates) operate at DCA?

 

[WorldTraveler]

Parker is pulling out all the stops to try to hold onto the DCA slots.
http://finance.yahoo.com/news/lobbying-american-us-airways-deal-012020612.html

 

[freedom]

He needs to pull out all the stops, I say give our competitors slots at any other airport in the country but let us keep our combined postion at DCA .....

If JetBlue causes trouble for us on this, at a later date ,we should kick them down until they are forced to close their doors ...

This hub is important not only to myself but my co-workers and we should be prepared to do whatever it takes to secure it .

 

[cynic]

http://travel.usatod...united/110395/1

The precedent that sets is that if you can work out a lease agreement prior to submitting the plan to the government, you won't have to permanently give them up.

 

[USFlyer]

FWIW, as a passenger, I would rather US keep all the slots it has to retain service to as many cities as possible, to avoid connecting somewhere. Where do I sign?

 

[WorldTraveler]

He needs to pull out all the stops, I say give our competitors slots at any other airport in the country but let us keep our combined postion at DCA .....

If JetBlue causes trouble for us on this, at a later date ,we should kick them down until they are forced to close their doors ...

This hub is important not only to myself but my co-workers and we should be prepared to do whatever it takes to secure it .

that is precisely why the government wants to make sure that US IS required to divest slots.

FWIW, as a passenger, I would rather US keep all the slots it has to retain service to as many cities as possible, to avoid connecting somewhere. Where do I sign?

If maintaining service to small cities is important, US can certainly pull down service to larger destinations. No one is telling them which cities they have to retain and which cities they have to dump; the DOT and DOJ will say that US has to reduce its slot holdings as a result of the merger.
Whining about cutting slots at small airports is a thinly veiled attempt to say that AA-US should be free from the same antitrust rules that every other carrier has been subjected to.

There is also nothing that says that the small cities that US feels a need to protect can't served by other airlines AFTER the slot divestitures.

One of AA/US' competitors (and you know exactly which one I am talking about) saysthey see opportunities as a result of the divestitures that AA/US will likely be forced to make.

Boo Wah Wah.

The DOT and DOJ will speak and life will go on.

It's Parker's job to figure out how to win and still play within the bounds of the law.

 

[USFlyer]

If maintaining service to small cities is important, US can certainly pull down service to larger destinations. No one is telling them which cities they have to retain and which cities they have to dump; the DOT and DOJ will say that US has to reduce its slot holdings as a result of the merger.
Whining about cutting slots at small airports is a thinly veiled attempt to say that AA-US should be free from the same antitrust rules that every other carrier has been subjected to.

The majority of the slots US holds are commuter slots, not mainline slots, so there isn't that much "larger destination" service to pull down besides services to hubs, which no other airline has been forced to reduce as far as I'm aware. I'm also curious how this would work if US is indeed required to divest slots, some of which will very likely be the commuter slots. What other airline would want them?

There really isn't an antitrust issue here. If anything, there is an antitrust issue if US is forced to pull down smaller cities as that will leave just UA in many non-stop markets from the DCA/IAD area. The issues is all "optics" and the politics of having Government employees determine winners and losers, in lieu of the marketplace.

Just curious, how many slots and gates and at what airports was DL forced to divest when it acquired NW?

 

[USFlyer]

Actually, I need to correct something I said. US-AA should be required to divest the commuter slots being used on duplicative service from DCA -- that being to RDU and BNA.

 

[FWAAA]

Parker has to pull out all the stops in the hopes of keeping the combined US-AA slot portfolio at DCA. If he fails, and new AA has to divest slots equal to the number currently held by AA (keeping new AA at the same number of slots as US), then a lot of people will ask him why he was so hell-bent to give DL so many LGA slots. If he succeeds at keeping most or all of the AA slots at DCA, then the DCA-LGA slot swap won't look quite as moronic in retrospect.

Had the DCA-LGA slot swap not been consumated, then new AA would have the largest number of LGA slots (about half of them following the inevitable gov't mandated divistitures) and new AA would have the largest number of DCA slots (about half of them). New AA would be the biggest at LGA and DCA.

Instead, new AA will be a distant second to DL at LGA and will probably be in the same position at DCA as US currently holds (about half the slots) once Parker loses the arguments and is forced to divest a substantial number of DCA slots (roughly equal to AA's current DCA holdings).

 

[robbedagain]

I agree fwaa that if the new aa is required to give up so many dca slots then they should question the lga slots that dl has but it probably could back fire on him as they could say that dp agreed to give up sooo many slots in the first place

 

[USFlyer]

Part of the analysis is not simply "number of slots" but also "number of seats". I know a saw a statistic somewhere that the combined AA-US would have a majority of slots but not more than 50% of the seats. Again, the majority of the existing US slots are commuter slots that can only be used on flights with fewer than 76 seats (I think that's the upper limit).

Some divestitures will surely be required -- the politics dictate that even if I disagree with it personally on other grounds. The question is how many and of what type. Of course, if the DOJ requires too many to be divested, it could always be fought in court. While I doubt the company would choose this path, it's always a possibility.

 

[FWAAA]

Part of the analysis is not simply "number of slots" but also "number of seats". I know a saw a statistic somewhere that the combined AA-US would have a majority of slots but not more than 50% of the seats. Again, the majority of the existing US slots are commuter slots that can only be used on flights with fewer than 76 seats (I think that's the upper limit).

Those who would argue on behalf of "the public interest" would say that even if new AA didn't have half the seats, despite having more than half the slots, that wouldn't excuse the perceived antitrust violation - new AA shouldn't be rewarded for using a large number of slots "inefficiently."

About the commuter slot distinction - I saw some 2005 regulatory changes to conform the 76 seat and smaller limit with the changes to the statute, but in the 2009-11 slot swap proceedings, I don't remember the DOT differentiating between mainline and commuter slots at DCA or LGA.

Perhaps my reading of the DOT tea leaves is too simplistic, but if the DOT was adamant in the LGA-DCA slot swap proceedings that the upper permissible limit was 50% of the slots at DCA (or LGA), then I assume that the government won't simply forget that "limit" when it comes to time to approve the AA-US merger, which will create the world's largest airline. Accordingly, IMO, it's a pretty safe bet that new AA will operate no more total flights at DCA than US does right now.

A different question is whether new AA gets to keep all six beyond-perimeter flights from DCA, which is the largest number of any airline. IIRC, US has three daily flights to PHX, one to LAS, and the new one to SAN. Last year, AA was awarded the LAX flight that it had to give up in 2001 to AS when AA bought the TWA assets to become the world's largest airline. As new AA will again be the world's largest airline, I would not be surprised to see new AA have to relinquish some of those six daily flights to low-cost new entrants.