US Airways May File Papers in Weeks on Delta NYC-Washington Swap

[Travelpro72]

I just don't see the problem this time around. What is the argument? Market share? Look at Southwest now with access to DCA plus their HUGE presence in BWI. Southwest gained access to EWR from the UA/CO merger and will have an even bigger presence in LGA. Allow the chip to fall where they may already. Apparently DL/US are hell bent on this for some reason.

 

[BoeingBoy]

I just don't see the problem this time around. What is the argument? Market share?

Yes, market share in one carrier's hands at each of the two airports capacity controlled airports. DL is currently #1 at LGA by a 20+% margin while US is #1 at DCA by nearly a 50% margin, not counting express. The original problem was having DL with 50% of the traffic at LGA and US with 70% of the traffic at DCA. Nothing has changed that.

Just because the feds tried to kill two birds with one stone the first time - lower the margin from what the proposed swap would have given each carrier at the respective airport and at the same time allow low cost carriers to get access - doesn't mean that the primary problem has been solved.

Jim

 

[john john]

"Deregulation" was really route and fare deregulation - airlines could fly almost anywhere they wanted and charge whatever they thought the market would bear.
Does that mean that US could fly an A333 to Southern Pines, NC? No - the pavement won't support that size of plane, the runway is too short, there's no airport fire/rescue, etc - FAA regulations keep it from happening.
Jim

So why are airlines regulated on routes in DCA LGA if deregulated disallow
I know, I know… grey area “almost” horse shoes

Are you saying the airport facility or safety issue at DCA LGA are in involved

 

[john john]

not counting express.

Jim

“Not counting Express”
This happens at every angel when it helps the cause

 

[usa1]

Yes, market share in one carrier's hands at each of the two airports capacity controlled airports. DL is currently #1 at LGA by a 20+% margin while US is #1 at DCA by nearly a 50% margin, not counting express. The original problem was having DL with 50% of the traffic at LGA and US with 70% of the traffic at DCA. Nothing has changed that.

Just because the feds tried to kill two birds with one stone the first time - lower the margin from what the proposed swap would have given each carrier at the respective airport and at the same time allow low cost carriers to get access - doesn't mean that the primary problem has been solved.

Jim

LINK: Swap will hurt American Airlines

 

[BoeingBoy]

“Not counting Express”
This happens at every angel when it helps the cause

I don't know what angels have to do with this but BTS info is by certificated carrier so each express carrier is broken out separately, so the US and DL numbers at DCA and LGA respectively are for the mainline carrier only.

Jim

 

[WorldTraveler]

Yes, market share in one carrier's hands at each of the two airports capacity controlled airports. DL is currently #1 at LGA by a 20+% margin while US is #1 at DCA by nearly a 50% margin, not counting express. The original problem was having DL with 50% of the traffic at LGA and US with 70% of the traffic at DCA. Nothing has changed that.

Just because the feds tried to kill two birds with one stone the first time - lower the margin from what the proposed swap would have given each carrier at the respective airport and at the same time allow low cost carriers to get access - doesn't mean that the primary problem has been solved.

Jim

The issue in reality is access to the airports by low fare competitors, not market concentration, per se. Remember that CO controls a lot larger portion of EWR than DL has or will have at LGA or JFK. Other carriers have larger shares than CO at EWR at their hubs.
The reason for UA/CO having to give up slots at EWR as part of their merger and likely why US and DL will have to give up some slots (whether DL or US have any say in who those carriers are remains to be seen) but the principle is to ensure that there is some level of low fare carrier access to these slot controlled airports. Given WN's presence now in NYC, DL/US's original plan to give slots to a handful of smaller airlines now seems reasonable.
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The problem is the lack of capacity in NYC airspace and the lack of runway and terminal space at LGA and DCA particularly. Those two problems are the domain of the feds and the airport operators, who in the case of DCA is the same party.

So why are airlines regulated on routes in DCA LGA if deregulated disallow
I know, I know… grey area “almost” horse shoes

Are you saying the airport facility or safety issue at DCA LGA are in involved

There are valid safety reasons to restrict DCA and LGA to shorter haul aircraft given the runway lengths although DL has been one of the most aggressive carriers at using widebodies at LGA in the past and has brought them to DCA on occassion. Given the proximity of the approach paths at DCA and the airport itself esp. to major national landmarks, longhaul widebodies are probably not going to be given a warm reception even if the runways could safely hand them.

LINK: Swap will hurt American Airlines

AA has lost a number of points of market share in NYC to DL even before this deal was announced. DL has used its slots to expand into key business markets, including some where DL's larger fleet of 2 class RJs can serve the market quite well.
The real competition in the NYC market will mirror the nation as a whole - 2 large megacarriers (DL and UA) and a couple of strong low fare carriers (in NYC it will be WN as a national LFC) and B6 which is more of a NE region low fare carrier. There is more than enough low fare competition in NYC to ensure that DL and UA don't take advantage of their size. AA and US are becoming secondary players in NYC although combined they could be a competitive force to DL and UA.
US is making this move to ensure that their presence at DCA remains large enough they don't become what is happening to AA in NYC.

I don't know what angels have to do with this but BTS info is by certificated carrier so each express carrier is broken out separately, so the US and DL numbers at DCA and LGA respectively are for the mainline carrier only.

Jim

I suspect the word he meant is "angle" which makes his statement that regional carriers are included or separated based on the "angle" you want to present.

 

[cynic]

The issue in reality is access to the airports by low fare competitors, not market concentration, per se. Remember that CO controls a lot larger portion of EWR than DL has or will have at LGA or JFK. Other carriers have larger shares than CO at EWR at their hubs.
The reason for UA/CO having to give up slots at EWR as part of their merger and likely why US and DL will have to give up some slots (whether DL or US have any say in who those carriers are remains to be seen) but the principle is to ensure that there is some level of low fare carrier access to these slot controlled airports. Given WN's presence now in NYC, DL/US's original plan to give slots to a handful of smaller airlines now seems reasonable.

The slots UA/CO "gave up" at EWR are leased, not sold. It's entirely possible that they will regain direct control/use of those slots at some point in the future.

 

[WorldTraveler]

nothng is ever set in the airline industry... but I can't think of a single instance in the airline industry where a carrier has given up a dominant position in a major city only to regain it at some later point in time.
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The slot deal will likely relegate AA and US to second tier status in NYC behind DL, UA, and B6 and WN (in prominence and control if not size).
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DL just said today that it has added a number of new corporate contracts in the past couple months resulting in a 25% increase in corporate revenue. Given that NYC is the largest corporate travel market in the world, it is no surprise that DL's expansio in NYC is leading to a shift in revenue.
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Against the changes in NYC, US has no choice but to fortify itself at DCA where it has the potential to have an advantage perhaps more significant than DL at LGA, if for no other reason because there are very few beyond perimeter flights at LGA and IAD's distance makes it a much more distant airport to WAS than LGA is to NYC..
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Flying 19 RTs per day LGA-PHL and losing money on point to point upstate NY to LGA service is having a significant financial drain on US. They need a way out of this that allows them to win as much as DL wants to further fortify itself at LGA.

 

[BoeingBoy]

The issue in reality is access to the airports by low fare competitors, not market concentration, per se.

Perhaps you should read the DOT initial notice on the slot swap. Just reading media articles doesn't always give the true picture...

"In the Notice, we noted that if the proposed transaction were
approved as presented, it would lead to significantly increased
concentration at DCA for US Airways and at LGA for Delta. Based on
their February 2010 schedules, US Airways would raise its share of
departures at DCA from 47 to 58%, with its share of slots (including
regional affiliates) increasing from 44 to 54%. This increase would
make it three times the size of its closest competitor (American
Airlines). At LGA, Delta (with its affiliates) would ascend to a
dominant position, raising its share of departures from 26 to 51% and
its share of slots from 24 to 49%. Delta would become two and one-half
times the size of its closest competitor (also American), and LGA would
transition from an airport with three competing carriers of similar
size to one having a single dominant carrier."

Jim

 

[BoeingBoy]

Aren't the "couple of weeks" that Kirby mentioned up today?

Jim

 

[WorldTraveler]

Jim,
the definition of "couple" has been dramatically redefined in recent years so I wouldn't get real excited about trying to mark off two exact weeks, esp. since DL's execs yesterday said they expect a deal to be announced within days or weeks at most.
The bottom line is that both DL and US are apparently willing to agree to a slot trade that is not as onerous as the DOT and FAA originally demanded and that allows DL and US to further concentrate their services at LGA and DCA respectively, and use the slots at both of those airports more efficiently. Removing a bunch of turboprops from NYC airspace is bound to help congestion in the NYC area alone.
If YOU read the rest of the DOT fililng, you would see that the concern was the limited amount of low fare carrier access to LGA and DCA after the slot deal which would result from the concentration of services. Plenty of airports in the US have concentrations of service under a single carrier far larger than what DL will have at LGA adn US will have at DCA even if DL/US got their original "ask". The DOT wants to make sure there is ample low fare carrier access to keep fares "in check" which is the same standard they have used in other route/merger requests. When you look at the number of markets that low fare carriers will serve at LGA and DCA post slot swap, it will be hard to argue that DL or US are in a position to monopolize the market to the exclusion of other carriers.
The only real question to be answered when the deal is announced is the total number of slots that will be exchanged and the mechanism for how those slots will be swapped. I am betting that the total number of slots to be "sacrificed" to LFCs will be less than what the DOT originally demanded and that DL/US will have some control over how at least some of the slots will be distributed.

 

[BoeingBoy]

Jim,
the definition of "couple" has been dramatically redefined in recent years so I wouldn't get real excited about trying to mark off two exact weeks, esp. since DL's execs yesterday said they expect a deal to be announced within days or weeks at most.

I know. I wasn't excited, just poking fun at one of the long-time posters who started this thread. He tends to breathlessly hand on every work management utters, tying disparate tidbits together in his imagination.

Jim

 

[FWAAA]

I'm not saying that the DOT or FAA planned to confiscate slots w/o payment.
I am saying though that the issue of ownership of slots was raised. The airlines have all argued (including AA and others not involved in the case) that slots are private property of the airlines and the US government cannot seize private property w/o compensation.

The US government has not attempted to "seize private property w/o compensation." The feds have merely demanded that US and DL relinquish some assets in order to bless an acquisition of assets that the feds have concluded may violate Section 7 of the Clayton Act.

DL and US also raised the issue of control of slots, including the ability for the owners to decide how to dispose of them if they desire. They argued that the FAA's sole role in slot controls is for safety purposes and can reduce the total number of slots but cannot specify how they are used, including whether they can be sold or transferred to other airlines.
The airlines argued (again with the support of the ATA and other US airlines not involved in the slot deal) that there is no law that exists that allows slots to be regulated on the basis of economic reasons.

There's no need for a specific law that permits "slots to be regulated on the basis of economic reasons" when the government is well within its right to demand concessions in exchange for permitting an asset acquistion that may violate Section 7 of the Clayton Act. The concessions demanded are reasonable and the attempt by US and DL to limit the recipients of the relinquished slots is offensive to consumers.

I suspect part of the reason why the DOT has been willing to settle is because there is a very real chance that they would lose the case. I also suspect that the issue of slot ownership will not be addressed.
I don't know the details of how the case will be settled but I will bet that there will be some "splitting the difference" with some amount of slots to be distributed by the airlines (DL and US) where they desire and a few will be given to the DOT where they can distribute them. Given that WN will have a fairly decent sized operation at LGA and DCA after the FL merger, I doubt if WN will get any slots which was the biggest concern of DL and US. I suspect the total number of slots to be divested will be closer to what DL and US proposed and not the DOTs demands based on the fact that the impact of LFCs in NYC is growing as a result of the FL/WN merger.

Parties to a lawsuit settle for a variety of reasons, and the risk of losing at trial is, of course, one of those reasons.

The issue in reality is access to the airports by low fare competitors, not market concentration, per se. Remember that CO controls a lot larger portion of EWR than DL has or will have at LGA or JFK. Other carriers have larger shares than CO at EWR at their hubs.
The reason for UA/CO having to give up slots at EWR as part of their merger and likely why US and DL will have to give up some slots (whether DL or US have any say in who those carriers are remains to be seen) but the principle is to ensure that there is some level of low fare carrier access to these slot controlled airports. Given WN's presence now in NYC, DL/US's original plan to give slots to a handful of smaller airlines now seems reasonable.

On this, you're simply wrong as a matter of fact and antitrust law. BoeingBoy, as usual, is correct on this issue. It's apparent that he understands how antitrust enforcement works. The government rarely steps in and demands that companies, even monopolists, relinquish assets out of the blue. Cases like AT&T's breakup are very rare.

But when dominant companies seek to acquire even more assets that will guarantee their dominance, the government often steps in and demands asset divestitures, just like in the US/DL slot case.

Yes, WN has acquired access to LGA and DCA, but that has nothing to do with the attempt by DL and US to increase their dominance at LGA and DCA, respectively. The proposed asset swap would still increase the dominance of DL and US, which the government has the power to alter based on the Clayton Act.

You may be correct that US and DL will end up relinquishing fewer slots than the government earlier demanded and you may be correct that US and DL will be permitted to hand-pick the recipients of the slots they give up, but your pronouncements of antitrust principles quoted above are simply not correct.

 

[WorldTraveler]

If the government decides to back off its original demands and DL and US are able to move forward with what they originally intended to do, then those antitrust laws that you believe are so cut in bedrock are apparently not as rigid as you think they are.
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The government has ATTEMPTED to limit the transfer of slots as part of its efforts to increase the amount of competition at LGA and DCA BUT DL and US, with support from the Air Transport Association, including American Airlines and nearly every other US airline that serves those airports - with the exception of WN - argued that the US government DOES NOT have the right to use economic bases in consideration of slot transfers. The only law that exists for slots is based on safety and airport capacity.
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The only way these points of law will be settled is if Congress specifically addresses them or if they are tested in a court of law. Given that there is no movement to address the issue in Congress, the question will remain unanswered if the parties settle without going to court. By allowing a settlement to move forward, the US government is agreeing that it is sometimes better to settle a particular case without addressing the legal issues undergirding it than to face a full-fledged and costly legal contest that could end up in the Supreme Court and which could significantly hamper the DOT and FAA's ability to do even what they are able to do now. Likewise, the airlines are willing to permit some degree of "regulation" in return for not addressing the issue of slot usage on economic reasons.
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As much as you and Boeing Boy would like to try to stop the changes that are happening in NYC for AA and US as a result of the slot transfer, the indications are that they will move forward, the legal issues will remain unanswered - as much as you want to position yourself as knowing them all, and that the trend of increased market concentration of the large major coastal markets toward a handful of carriers will continue.
If AA and US want to stop that trend, perhaps the best bet would be for the two to figure out a way to use their remaining positions to somehow jointly benefit each other and raise their positions to levels competitive with the carriers that have decided that mergers really do make sense.