Delta, US Airways Close Deal to Transfer Flying Rights in New York and Washington, D.C.

[BoeingBoy]

I thought DCA had two classifications. Slots for aircraft <= ~70 seats (which used to be <= ~50 seats) and slots for aircraft > ~70 seats. I remember Dave Siegel lobbying back in the day to have the number changed from 50 to 70 (or thereabouts) and made a big deal about it at the time.

Your memory is excellent. Siegel lobbied for the size increase on commuter slots so that MDA, flying the E170, could use commuter slots at DCA. I've seen nothing that says how many of US' slots are commuter slots (either those previously controlled or those acquired in the slot swap) but 27% of slots at DCA overall are commuter slots restricted to aircraft having 70 or fewer seats.

Jim

 

[BoeingBoy]

Does anyone know what additional gates US will be taking? This morning's press release indicated there would be new gates and a new US Airways Club. With Delta shrinking, could UA now fit on the concourse wth CO, and US take UA's current gates at DCA? Just wondering.

It remains to be seen. Part of the approval requires the divesting carrier (DL at DCA) to make gate/ramp/counter space available to those getting the divested slots if the airport is unable to arrange gates/ramp/counter space. So while DL may not need all the gates/etc at DCA, they may have to make it available to B6 as the acquiring carrier.

Jim

 

[WorldTraveler]

The DOT slot swap approval does not seem to indicate that any of the DL or US slots involved in the swap are commuter slots although the following note is made about the Republic slots operated for US.
"Republic Airways Holdings holds 113 total
slots at DCA, as the result of a sale/licensing
transaction with US Airways. Its subsidiaries
largely operate from these slots under pay-forservice
arrangements with US Airways. All 113 are
commuter slots, rather than air carrier slots.
Republic’s operations from these are included
within US Airways’ results in the tables for DCA."

The slot approval document is too large to attach... I will email it to anyone who is interested or you can find it at regulations.gov. Docket No. FAA–2010–0109.

 

[BoeingBoy]

The DOT slot swap approval does not seem to indicate that any of the DL or US slots involved in the swap are commuter slots although the following note is made about the Republic slots operated for US.

I don't think there's a distinction in LGA so DL can use the new slots any way they want. At DCA, where the distinction exists, B6 would not bid $40 million on commuter slots it couldn't use so at least those 8 pairs are mainline slots. With the size planes that US is using on the new routes they could be either - while commuter slots have a maximum seat limit, mainline slots don't have a minimum seat limit (although using an RJ for a mainline slot is a real waste, I certainly wouldn't doubt that US would do it since keeping mainline at the minimum fleet count seems to be of importance).

Jim

 

[USFlyer]

It remains to be seen. Part of the approval requires the divesting carrier (DL at DCA) to make gate/ramp/counter space available to those getting the divested slots if the airport is unable to arrange gates/ramp/counter space. So while DL may not need all the gates/etc at DCA, they may have to make it available to B6 as the acquiring carrier.

My guess, UA will move over with CO and take some gates from DL. US will take the current UA gates. The current UA club will become the second US club. No idea whether UA will keep a club in DCA. I forget if there's room somewhere for one -- CO never had one as far as I know.

 

[WorldTraveler]

I don't think there's a distinction in LGA so DL can use the new slots any way they want. At DCA, where the distinction exists, B6 would not bid $40 million on commuter slots it couldn't use so at least those 8 pairs are mainline slots. With the size planes that US is using on the new routes they could be either - while commuter slots have a maximum seat limit, mainline slots don't have a minimum seat limit (although using an RJ for a mainline slot is a real waste, I certainly wouldn't doubt that US would do it since keeping mainline at the minimum fleet count seems to be of importance).

Jim

indeed... and if the goal is for US to hold onto assets that could be used in a future asset swap or merger, then it doesn't really matter. A DCA hub with a much higher percentage of mainline jets would be very attractive to any number of carriers. It would be nice to see the slots used now but US' slot portfolio will figure into future industry consolidation.

 

[BoeingBoy]

The problem with US' slot holdings in DCA and "consolidation" is the same problem the DOT/DOJ had with the US/DL swap - too large a percentage of slots under one carrier's control. I would expect if US merged with AA the number of slots controlled would be about the same as US has now although the mix of mainline/commuter might change.

Jim

 

[WorldTraveler]

The problem with US' slot holdings in DCA and "consolidation" is the same problem the DOT/DOJ had with the US/DL swap - too large a percentage of slots under one carrier's control. I would expect if US merged with AA the number of slots controlled would be about the same as US has now although the mix of mainline/commuter might change.

Jim

agree... but if you take out the regional carrier slots (what Republic has), then US' combined w/ anyone else doesn't look so bad... if the RJs really are a dying breed, then those slots could be drawn down - or more likely someone will argue to the Feds that the the economics of small jets don't work, the slots need to be reclassified to include 76/90 passenger jets and then you have a gradual size increase over a period of time - and the slots do become more valuable.
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Do you know the history of how Republic got all of those slots and how many if any commuter slots are held by other carriers?
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ANY asset is good and US does have an advantage by holding 50% of the slots at a key airport... how that plays into what US becomes long term is obviously TBD.

 

[crusher]

The slots were part of a deal in BK2 I believe. RPA bought into US in exchange for the slots, but the slots could only be used for US flights and could be bought back at anytime by US for the same price .RP can only do 2 things with the slots , fly for US or sell them back to US. US needed a money infusion and RP had the cash.

 

[WorldTraveler]

The slots were part of a deal in BK2 I believe. RPA bought into US in exchange for the slots, but the slots could only be used for US flights and could be bought back at anytime by US for the same price .RP can only do 2 things with the slots , fly for US or sell them back to US. US needed a money infusion and RP had the cash.

I do recall something like that.... so effectively they are US slots... but could be sold....
now... do you remember how and when the difference between mainline and regional slots was created?

 

[hp-csr-phx]

Did US buy back the slots?

republic-airways-receives-47-5m

 

[700UW]

US had the first rights on buying back the slots, but didnt US finance the 170s that they sold to them?

 

[BoeingBoy]

agree... but if you take out the regional carrier slots (what Republic has), then US' combined w/ anyone else doesn't look so bad... if the RJs really are a dying breed, then those slots could be drawn down - or more likely someone will argue to the Feds that the the economics of small jets don't work, the slots need to be reclassified to include 76/90 passenger jets and then you have a gradual size increase over a period of time - and the slots do become more valuable.

The problem would still exist or be worse if larger aircraft could be operated using commuter slots. After the restrictions on the slot swap, I just don't see any way that the feds would allow US to merge with AA (or UA or DL) and the resulting carrier keep all the combined slots. If the DOT/DOJ would be OK with US-AA/UA/DL having 55-60-65% of the slots at DCA why did they object to US having 54-57%? It defies logic...

Jim

 

[BoeingBoy]

The slots were part of a deal in BK2 I believe. RPA bought into US in exchange for the slots, but the slots could only be used for US flights and could be bought back at anytime by US for the same price .RP can only do 2 things with the slots , fly for US or sell them back to US. US needed a money infusion and RP had the cash.

Almost exactly right. Republic offered exit financing in exchange for buying the 170's and slots. In the end, because Republic and Air Wisconsin got a better price on the LCC stock than the other outside investors, US declined to accept Republic's exit financing (Air Wisconsin had given DIP financing so that money had changed hands and been spent making it impossible to keep them from getting LCC stock upon exit from bankruptcy).

Regarding the ability of US to re-acquire the slots, I believe US has first right of refusal and not the sole right to buy them but I could be mistaken about that.

Jim

 

[WorldTraveler]

Almost exactly right. Republic offered exit financing in exchange for buying the 170's and slots. In the end, because Republic and Air Wisconsin got a better price on the LCC stock than the other outside investors, US declined to accept Republic's exit financing (Air Wisconsin had given DIP financing so that money had changed hands and been spent making it impossible to keep them from getting LCC stock upon exit from bankruptcy).

Regarding the ability of US to re-acquire the slots, I believe US has first right of refusal and not the sole right to buy them but I could be mistaken about that.

Jim

I have not argued that US could engage in any merger or asset acquisition retaining all of its current DCA slot portfolio plus what it might acquire from another carrier.
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I have consistently said that because the DOJ came very close to intervening to block the DCA part of the DCA-LGA DL/US slot swap means that the chances are very high that no carrier will be able to expand its current DCA operation to include more than 50% of the total DCA slots.
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I have said that US has assets and strategic options BECAUSE it already controls a majority of DCA slots and any combination with any other carrier would increase those holdings - which most definitely do have value.
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US' current DCA slot holdings constitute one of its most valuable strategic advantages... Parker and company are smart enough to figure out how to rearrange the industry in a way that is favorable to US using the assets he has on the table, including DCA.