VOL. 128 | NO. 222 | Wednesday, November 13, 2013
How American-US Airways Deal Impacts Competitors
SCOTT MAYEROWITZ | AP Airlines Writer
NEW YORK (AP) – The Department of Justice announced Tuesday that it would let the merger of American Airlines and US Airways proceed after the two carriers agreed to give up landing and takeoff slots and gates at key airports, notably Washington's Reagan National and New York's LaGuardia. With the agreement, the government hopes to increase access to the nation's busiest airports for low-cost airlines and to maintain flights to smaller cities.
Here's a look at what the proposed merger would mean for the new American's competitors. They're listed in order by size:
UNITED AIRLINES, DELTA AIR LINES
Currently the two largest airlines in the world, United and Delta will face increased competition from the combined American and US Airways, which will be slightly larger. The newly combined airline will serve more cities, with easier connections than American or US Airways individually offer.
Delta has been aggressively picking up lucrative corporate contracts, expanding in New York, Los Angeles and Seattle. American's improved route network will make it harder for Delta to steal away additional business.
Delta said Tuesday that it would like to acquire additional slots at Washington D.C.'s Reagan National Airport. But the government isn't likely to allow that. When asked about Delta's interest in those slots, Bill Baer, who heads the DOJ's antitrust division, said: "We see legacy carriers as part of the problem."
United has had a bumpy time implementing its merger with Continental. It has a stronger network to places like Asia. But thanks to American's bankruptcy court restructuring, United now has a higher cost structure.
Southwest has aggressively added flights to cities abandoned by larger airlines. If the new American cuts flights out of a city like Phoenix, Southwest could try to get a stronger position there. Phoenix is already the fifth largest city in its network, by originating passengers.
Southwest will be allowed to permanently keep 10 landing and takeoff slots that it currently leases from American in New York. It can also join in a bidding process for more slots there and in Washington, D.C.
American will also have to give up its gates at Dallas Love Field, further strengthening Southwest's overwhelming presence there. The airport close to downtown Dallas will become much more desirable next year when restrictions on which destinations carriers there can serve nonstop are removed.
New York-based JetBlue has a close relationship with American, and both airlines have big operations at Kennedy Airport. But JetBlue is now trying to compete with the other airlines for high-paying first class travelers between New York and California.
JetBlue will be allowed to permanently keep 16 landing and takeoff slots that it currently leases from American in Washington D.C. It can also join in a bidding process for more slots there and in New York.
Alaska's core territory is flights up and down the West Coast, and even the merged American will still trail Delta and United in that part of the country. But Alaska does have a lessor relationship with American, feeding some flights to the region.
The low-cost airline will now face stronger competition on its lucrative Caribbean routes. However, it is aggressively expanding into large cities like Houston, Orlando, Detroit, Denver and Dallas. If American, Delta, Southwest and United raise fares in those cities, more passengers might flock to Spirit. It could also bid for some slots that open up in Washington and New York.
The airline has a heavy debt load and loses money. The merger could amplify Virgin's struggles to lure business travelers. However, more leisure travelers looking for an alternative flying experience might be attracted to Virgin. It might also seek slots in Washington and New York.
ALLEGIANT AIR and FRONTIER AIRLINES
These two airlines have focused on smaller cities that have trouble attracting larger airlines. If routes now served by American and US Airways are dropped, these two carriers could take advantage of the vacuum. They too might try for slots in New York and Washington.
Scott Mayerowitz can be reached at www.twitter.com/GlobeTrotScott
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