Delta Cements LaGuardia Grip With Trade of Flight Slots

Delta Air Lines Inc. (DAL) strengthened its grip in New York, the nation’s busiest aviation market, by winning federal approval to swap takeoff and landing slots with US Airways Group Inc. (LCC) to expand at LaGuardia airport.

U.S. regulators gave the go-ahead to the exchange yesterday, capping a push by Atlanta-based Delta that began more than two years ago. Delta will gain control of about half the flights at LaGuardia airport by trading slots to US Airways at Ronald Reagan Washington National Airport.

“Delta clearly wants to own the New York market, and they’re doing what they have to do to get there,” said Helane Becker, an analyst at Dahlman Rose & Co. in New York. “Doing this transaction with US Airways has been a long time coming.”

Taking over most of the US Airways terminal space at LaGuardia will widen Delta’s advantage over AMR Corp. (AMR)’s American Airlines, the second-biggest carrier there. Creating a domestic hub at LaGuardia will complement Delta’s international base at Kennedy airport.

Delta will gain 132 more LaGuardia slot pairs while giving up 42 pairs in Washington to Tempe, Arizona-based US Airways, the U.S. Transportation Department said in a filing. The carriers must divest 24 pairs to smaller rivals, 16 at LaGuardia and eight at National.

Cash-Only Website

The divestitures will go through a cash-only “blind” website run by the Federal Aviation Administration, with the LaGuardia slots being packaged into two bundles that must be sold to two separate carriers, the Transportation Department order said.

Delta rose 2.6 percent to close at $8.42 in New York, and US Airways added 6.7 percent to $6.23. The regulatory approval was granted yesterday after the end of regular trading.

Separately, the Justice Department said yesterday it will continue its antitrust examination of the US Airways slots at Reagan National. Delta’s LaGuardia plan doesn’t raise competitive concerns so that review will be dropped, according to an e-mailed statement.

Trebor Banstetter, a Delta spokesman, said the airline had no immediate comment. US Airways also had no comment, Todd Lehmacher, a spokesman, said today.

LaGuardia and Reagan National are so congested that they are under federal flight restrictions, meaning carriers must trade slots in order to grow.

New York Market

Expanding at LaGuardia will help Delta gain ground on United Continental Holdings Inc. (UAL), which led the New York market with 27 percent of passengers through last year, most at a hub at New Jersey’s Newark Liberty airport. Delta had 20 percent, and Fort Worth, Texas-based American had 13 percent, according to the Port Authority of New York and New Jersey.

United, based in Chicago, is the world’s largest airline by passenger traffic, followed by Delta. American is the third biggest U.S. carrier.

While US Airways has said it will scrap most of its money- losing LaGuardia operations to focus on Washington, the slot exchange will sharpen New York City-area competition, where passengers are spread among three major airports.

“While LaGuardia may have been unprofitable for US Airways, it is less likely to be so for Delta because of its large market share in New York,” Stephen Wilder, a transportation analyst at Capstone Investments, wrote today in a note to clients. “A slot swap makes sense for both parties.” He recommends buying the shares of both carriers.

At LaGuardia, Delta’s share of flight slots will jump to 45 percent, from 24 percent previously, widening the lead over American’s 21 percent, according to a regulatory filing in August from Southwest Airlines Co. (LUV) objecting to the trade.

Southwest and the AirTran unit, acquired earlier this year, together control about 3.3 percent of LaGuardia slots. Other companies that objected to the deal include JetBlue Airways Corp. (JBLU) and Virgin America Inc.

Delta and US Airways initially sought a slot trade in 2009. They later walked away from that deal, saying the divestitures sought by regulators were too great.

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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