Some time ago, US Airways and Delta Airlines came to an agreement to “swap” slots between New York’s La Guardia Airport and Washington DC’s Reagan National Airport.  Delta would get a large number of slots in New York and US Airways would get a smaller but more important number of slots in DC.   Each airline would get to consolidate their power in the city they’ve chosen to be a power player in. 

This required regulator approval from the Department of Transportation and the DOT finally issued their ruling on this.  They were OK with it only if each party sold a number of those slots in the respective markets.  And they preferred that the slots go to “slot needy” airlines (i.e. airlines who have no slots at those airports or who have an extremely limited number of slots.) In other words, the DOT wasn’t completely comfortable with just how consolidated each airline would become in each market. 

Both airlines expressed dismay and offered that they wouldn’t necessarily go through with the deal if those were the conditions.  Both felt that the consumer was losing out on improved benefits in those markets.   Oh, and of course this is the fault of the Obama administration according to some pundits. 

Now, the airlines don’t want to give up those slots to the slot needy because it potentially allows a toehold into two markets that have been very difficult for LCC carriers to find access to.  Southwest Airlines, for instance, only managed entry into the La Guardia market by buying the assets of defunct ATA.   jetBlue would love access to Washington National but there has been no real opportunity there either.  Frankly, both Delta’s and US Airways shuttles between NYC and DC would be pretty threatened by a jetBlue operation running between those two cities and Boston. 

Frankly, I’m glad the DOT put those conditions on this swap.  First of all, no consumer ever benefited from an airline consolidating its position in a market.  The benefits airlines speak of are things like connections to other destinations, through ticketing to other destinations, etc.  The benefits are *not* better prices.  Ask people how American Airlines is doing in Dallas ever since Delta withdrew from the market. 

I don’t mind airlines merging and growing bigger but I do mind airlines carving out domains in certain markets with regulatory approval.  Those markets aren’t monopolies to be granted.  And in those two particular markets, there isn’t exactly a limited number of customers available. 

In fact, in those two markets, LCC carriers have been shut out largely by large, legacy carriers who have “sat” on their slots rather than give them up or sell them.  It is quite literally to their benefit to operate a slot pair with a 40 seat RJ rather than to give the slot up because the introduction of competitive fares from LCC airlines who might get a toehold will literally decimate their yields in those markets. 

But keeping competition away and even allowing airlines such as Delta and/or US Airways to consolidate their strength in such markets is tantamout to providing artificial support to airlines who have cost structures that are no longer viable in most of the United States.   I do wonder what the anti-Obama administration pundits have to say about this kind of government support for legacy airlines? 

The truth is, we need to distribute *more* of the wealth in those slot controlled markets, not consolidate it.  We need other airlines encouraged to enter those kinds of markets and provide solid competition on routes that are held in a stranglehold grip by legacy airlines.  That is what will benefit the consumer.

Filed under: Airline News by ajax