US/DL Overlap Issues

[Flying Titan]

I thought I would start a separate thread for this since I'm sure anti-trust issues will have a lot to do with how this merger will end up - if it happens at all.

Given the state of the industry since 9/11, I believe the DOJ is likely to approve this merger in some form (assuming the BK court wants it) - but the question is how much will have to be carved out.

One of the shuttles will have to go. AA or B6 is my best guess as a buyer. Some LGA and DCA slots will have to be sold. What percentage? Both of these problems can be overcome, but what about smaller markets in the southeast? If the "new" Delta has hubs in CLT and ATL, then it has the only hubs in that quadrant of the country (except the small NWA Memphis hub). How many markets ONLY have service from US and DL? Smaller markets in FL, AL, and MS come to mind. I'm sure there are others. How does the "new" Delta get past this problem? Will it be forced to give up CLT?

Again, I think DOJ ultimately would approve the deal - but it seems like more carve-outs are necessary.

 

[RowUnderDCA]

DOT is going to focus on gates and slots. I think that DOJ is advisory... but I might be wrong.

Since LCC and DAL don't have the monopoly on gates that it presumed at PHL and certainly not at LGA or JFK, I think that minor tweaking of gates and slots in the NYC/PHL markets will be required. Whether the proposing executives really intend to offer hubbing and international service out of both PHL and JFK is unknown, but I have to expect it wouldn't be long lasting.

However, I think that DOT is going to be very concerned about gate availability for hubbing at ATL and CLT. They are going to want to up the possibility of a third hubbing carrier between the three airports. That means gates are going to have to go... in my opinion.

I'd suspect that retaining hub operations at SLC and PHX and the gates is likely to be ok. Consolidating current DAL and LCC LAS operations in LCC's terminal is likely to be satisfactory.

Of course A shuttle would have to go.

However, I'm not convinced that this proposal is put forward with the intent of it being consummated.

 

[robbedagain]

wonder if this might work: the shuttle, reduce the number of flts bothe operate and combine the remainder and keep say about 10 or so planes for spares and parts if needed down size phl keep clt but may be reduce the number of flts out of ATL not sure about DCA and LGA but may be have to sell some slots--but I think it could be hard for US since CO sold it or is leasingit to US at LGA or something like that

 

[phllax]

AA would buy the Shuttle in a second, but I'm not so sure AirTran, JetBlue or United wouldn't make a play for it either.

In LGA, the DL unit terminal would be the one sold off and operations concentrated in the US terminal. Don't know about the slot situation, but there is considerable overlap on DLC and USX routes.

As for DCA slots, minues the the DL & OH shuttle, DL mainline only serves ATL, CVG, & SLC, while DLC flies to BTR, CMH, HSV, LEX, MLB & SAV, JFK. US also flies from DCA to CMH and SAV.

The thing to remember about the slots at LGA and DCA is that the airlines don't always own their slots. Many of US's slots are leased from NW, who tried a mini-hub at DCA after EA went bust.

 

[markkus757]

I'm sure US would condense into the new terminal 'A' in BOS. I can also see DL consolidating into US's space at PVD. US has a gate that needs a jetbridge and then, with 5 gates plus a 2-spot turboprop gate, the combined ops should have plenty of room (DL has 3 gates in PVD, but only uses 2). US also has 2 counter spots they don't use - so does DL. The airport is also scheduled to built 2 more spots right next to US, so DL could easily put thier 6 spots into the 4 US doesn't use.

 

[ClueByFour]

I thought US sold a bunch of DCA/LGA slots to Republic in BK II and was leasing them back. If I'm Republic, I'm licking my chops at this point.

 

[RowUnderDCA]

I posted this on the other thread, mistakenly.

ok.. .here's a mental exercise:

If WN had major operations at CLT/PHL/LGA/BOS/PIT/DCA/PHX/LAS/SCL/ATL/CVG/JFK

and WN had a 'express partner' operation

and WN had international routes or an international partner

What would the route map look like?

Now, do that and add increase WN's 'connecting activity' by 10% and add the resulting added routes.

Nobody would question WN doing this because it would be presumed that WN was going after O & D. So maybe this is a little bit of that... go after the local market and spread out connectivity over the system.

Is this how a legacy carrier transforms?

But I still think this may just be a ploy.

 

[Flying Titan]

I thought US sold a bunch of DCA/LGA slots to Republic in BK II and was leasing them back. If I'm Republic, I'm licking my chops at this point.

This may turn out to be a way for the "new" Delta to hang on to more slots than if US still owned them.

 

[CLT-Douglas]

It would be no surprise if the DOT concludes having both CLT and ATL as major hubs would be a monopoly. Delta is the one in bankruptcy not US Airways. US would have a difficult time pulling a PIT in CLT and reject the long term leases on a concourse of gates very quickly. What would be the alternatives? Rejecting Delta leases on gates in ATL?

 

[TechBoy]

Going back to the original topic, I think that the antitrust analysis of this potential merger can be limited to 3 topics -- 2 of which can be handled fairly easily with the third being the sticking point.

1. DCA/LGA/Shuttle. Clearly, one Shuttle gets divested. Given some real overlap in LGA commuter routes, I suspect that some divestiture will be required there. At DCA, there is very little overlap (plus competition from UA at IAD) so I think that there will be little to no slot divestiture.

2. ATL/CLT Hubs. These are the only two viable hubs in the southeast. There is some competition from IAD and MEM. The question about the hubs is whether the dominance of both hubs restricts consumer options to connect throughout the region. At ATL, there is a competing hub from AirTran and it is clear that another hubbing carrier at ATL is not viable. So perhaps AirTran can made the case for getting the US gates at ATL. CLT is a different story. US is far more dominant there and there is a gate shortage for competitors to enter. In this case, I suspect that US would need to divest as many gates as other carriers could make a viable case for needing. Between WN and B6, I can't see them needing more than 10 gates. Remember that neither would want to run a hub there, just run more spokes in their current operations. So the hub problem can be solved without too much pain.

3. Small Southeastern Markets. Between DL and US, many small southeastern towns have little other choice for air travel. This problem cannot be solved through gates or slots because both are available in all of these markets. The question is whether the potential to connect through other hubs (mainly IAD and MEM) is sufficient to prevent significant price increases in these markets. Will other carriers increase service enough to check the new DL? Figuring this out is more art than science. If fares rise enough, we could see B6 entering some of the larger of the small markets with 190s and UA and NW increasing capacity to their hubs. But will that be enough? Unclear.

I suspect that the current Administration is not so focused on antitrust that they will block a merger solely on those grounds. But only time will tell.

 

[robbedagain]

if US has enough gates they dont use in CLT whynot try to sell those back to the airport and if enough may be it might be easier for the merger just my thoughts

 

[700UW]

US does not own the gates, they lease them from the city. They do own some of the jetways, but did sell a bunch of them back to the city.

 

[a320av8r]

I can see why the regulated slots will be an issue, but the unregulated "free market" cities will not come into play. Anybody can add flights to CHS et.al. from any city.

 

[Busdrvr]

I can see why the regulated slots will be an issue, but the unregulated "free market" cities will not come into play. Anybody can add flights to CHS et.al. from any city.

Good luck with that... That's like saying anyone can go out and drill a deep water oil well in the gulf and build a refinery in a foreign country and then take on the big oil companies.... Right

The power of a merger is in the "synergies". It's in the power of the "S-curve". When someone in CHS or CAE decide to go to birmingham on business, they have two real options. Now they will have one. While you may say someone can 'add flights from Birmingham to CHS', they could not compete because it's the hubs at CLT and ATL that make it viable route.

 

[700UW]

Per Federal Law, if an airline wants to start service to a non-slot controlled airport the airport has to accommodate them and in slot controlled airports if they are a new entrant they have to give them slots, ie B6 at LGA.