Money Matters - Simplified

Delta, US Airways strike deal; Southwest edgy

Both carriers hope to see the deal coming to fruition, but they said they will continue to compete against each other without any changes. The deal will allow them to focus their investment in one market.

Delta Air Lines Inc. and US Airways Group Inc. have agreed to give up 20 pairs of take off rights at U.S.’s two most congested airports, La Guardia Airport and Ronald Reagan National Airport, in order to win a regulatory backing of an asset swap.

Delta said on Monday that it would transfer 15 pairs of landing and takeoff slots to AirTran Airways, Spirit Airlines and WestJet at La Guardia; while US Airways will transfer five pairs at the Reagan National to JetBlue Airways.

The nation’s biggest airline, Delta, also said that the agreement would “expand air service, competition and employment in New York.”

The swap deal
With the new swap, Delta would operate 110 new slot pairs at LaGuardia, while US Airways would add 37 at the Reagan Airport.

Scott Kirby, President of US Airways, said in a message on Monday that the new agreement devised Federal Aviation Administration's goals to “enhance access for airlines with fewer than 5 percent of the slots in these key markets.”

Just as the deal is nearing fruition, US’s leading low-fare carrier, Southwest Airlines said on Monday that the Delta-US Airways assets swap deal should be sold through an auction to the highest cash bidder.

Kirby also said that a court challenge would be expensive and time consuming.

“This move would improve our stability over the long term and would accelerate our path back to sustained profitability,” he said.

Both carriers hope to see the deal coming into fruition, but they said they will continue to compete against each other without any changes. The deal will allow them to focus their investment in one market.

Southwest Airlines suggests auction
Just as the deal is nearing fruition, US’s leading low-fare carrier Southwest Airlines said on Monday that the Delta-US Airways assets swap deal should be sold through an auction to the highest cash bidder.

The proposal would otherwise hinder growth for Southwest Airlines, which was opposing the swap deal from the beginning. The airline said the slot trade represented “a division of markets that is designed to eliminate existing competition.”

“US Airways and Delta did exactly as we feared by attempting to hand-select their competitors in New York and Washington,” said Robert W. Kneisley, associate general counsel for Southwest.

Rick Seaney, chief executive of Farecompare.com, favored Southwest and said it would bring “absolutely cheaper prices.”

He said the Southwest airlines can be a threat to other airlines, making them lower prices of tickets. “That's the Southwest Effect,” Seaney said.