Other airlines like Virgin America, Spirit, and United will consider throwing their hats in the ring, but only these two carriers have the cash to spend and room to grow without upsetting U.S. regulators.
The sale of prized airport flight slots as part of the American Airlines-US Airways Group Inc. merger is poised to trigger a second faceoff between the country’s biggest low-cost carriers.
JetBlue Airways Corp. was the victor in a 2011 auction for access to Washington’s Reagan National and New York’s LaGuardia, topping larger Southwest Airlines Co. Now, flight rights at the airports are going on the block again under the settlement ending the U.S. lawsuit over the American-US Airways tie-up.
Reagan National and LaGuardia are among only four U.S. airports with federal flight curbs to damp congestion. Airlines covet chances to fly there, because the airports’ proximity to the cities’ downtowns makes them popular with business travelers who typically buy the most-expensive tickets.
“JetBlue and Southwest clearly are going to be the most active bidders,” Hunter Keay, a Wolfe Research Inc. analyst in New York, said in an interview today. “For Reagan and LaGuardia, those two are probably going to be the driving force. They’ve got the cash to spend.”
AMR Corp.’s American and US Airways will give up 52 pairs of flight slots at Reagan — for one takeoff and landing — and 17 pairs at LaGuardia as part of the Nov. 12 accord to resolve the Justice Department suit. The divestitures are intended to boost competition and reduce fares by bringing in more low-cost operators, according to the government.
Southwest and New York-based JetBlue have signaled for months that they wanted more flights at Reagan National and LaGuardia, and spokeswomen reaffirmed those goals in e-mails this week. US Airways is the dominant carrier at Reagan National, and Delta Air Lines Inc. has the largest share of LaGuardia flights.
“All low-cost carriers likely have some interest, but JetBlue and Southwest are the most eager bidders,” Duane Pfennigwerth, an Evercore Partners Inc. analyst in New York, said in a note to investors. “JetBlue and Southwest see a larger opportunity at Reagan.”
Spirit Airlines Inc. is studying whether to participate, said Misty Pinson, a spokeswoman, while Virgin America Inc. Chief Executive Officer David Cush said the airline will take “a hard look.” Allegiant Travel Co. has “no specific plans to bid,” said Micah Lillard, a spokesman.
Airlines like Dallas-based Southwest and JetBlue must keep operating costs low to help ensure they stay profitable. They don’t have first- or business-class seats or flights to Asia or Europe like full-service airlines such as American, which will vault to No. 1 in the global industry in traffic after the merger from No. 3 in the U.S.
US Airways controls 55 percent of Reagan National flights, a share that would have swelled to 69 percent with the merger. Giving up the 52 slot pairs will leave the new American with 57 percent of daily departures. The combined carrier will have about 28 percent of LaGuardia flights.
With 69 slot pairs in the auction, the current divestitures will be almost three times as big as the 2011 sale, when 24 slot pairs were put up for bid after Delta and US Airways swapped New York and Washington landing rights. JetBlue paid $72 million for eight slot pairs at Reagan National and eight pairs at LaGuardia. Canada’s WestJet Airlines Ltd. bought eight LaGuardia pairs for $17.6 million.
Full-service carriers like Delta and United Continental Holdings Inc. probably won’t win U.S. approval to acquire LaGuardia or Reagan National slots in this go-round, Renata Hesse, a senior official in the Justice Department’s antitrust division, said today in Washington.
“Whether somebody wants to try to get assets, we’re not going to stop people from trying,” Hesse told reporters. “But it’s hard for me to see how Delta and United would qualify.”
Delta said yesterday that the New York-Washington auctions should be open to all airlines. A message left today with United’s media office wasn’t immediately returned.
New York’s Kennedy Airport and New Jersey’s Newark Liberty are the only two other U.S. facilities besides Reagan National and LaGuardia with federal flight-slot controls. The AMR-US Airways settlement also requires the carriers to divest two airport gates in Los Angeles, Boston, Miami, Dallas and Chicago.
With assistance from David McLaughlin and Adam Johnson in New York. Editors: Ed Dufner and John Lear.
To contact the reporter on this story: Mary Schlangenstein in Dallas at email@example.com. To contact the editor responsible for this story: Ed Dufner at firstname.lastname@example.org.
Photo credit: A Southwest 737 jet takes off. John Murphy / Flickr