Southwest Airlines Co. (LUV) and JetBlue Airways Corp. (JBLU) told regulators they’re interested in acquiring Washington flight slots that may be available under a settlement of the U.S. lawsuit to block the American Airlines-US Airways Group Inc. (LCC) merger, people familiar with the matter said.
The carriers want American and US Airways to give up as many slots as possible at Reagan National Airport, said the people, who asked not to be identified because details are private. Southwest also is in discussions with the Justice Department about adding slots at New York’s LaGuardia Airport, one person said.
Having a market for the slots would clear a possible hurdle as AMR Corp. (AAMRQ)’s American, US Airways and the Justice Department explore resolving the antitrust lawsuit filed Aug. 13 to block the merger. A post-merger American would have an unacceptably high 69 percent of Reagan National flights, the U.S. says.
For Southwest and JetBlue, the Justice Department’s insistence on AMR-US Airways asset sales as a condition to approve a merger creates an opportunity to expand at Reagan National, the only one of Washington’s three major airports with federal flight limits.
Attorney General Eric Holder said Nov. 4 that divestitures would be required at crucial airports across the U.S. as part of “any resolution in this case.” If settlement talks don’t succeed, the U.S. is prepared to go to trial Nov. 25, he said.
Gina Talamona, a Justice Department spokeswoman, declined to comment on whether the department is in discussions with Southwest and JetBlue about slot divestitures.
American declined to comment, said Michael Trevino, a spokesman. Ed Stewart, a spokesman for Tempe, Arizona-based US Airways at Fleishman Hillard Inc., Southwest’s Beth Harbin and Jenny Dervin at JetBlue also said they had no comment.
Southwest plans to argue in the antitrust lawsuit that the increased concentration of slots as a result of the merger of American and US Airways would “substantially lessen” competition, according to a court filing today in federal court in Washington. The carrier won permission from the judge overseeing the case to file a friend-of-the-court brief.
“Those anticompetitive effects could be mitigated only if a significant number of slots were divested to Southwest,” the airline said.
JetBlue fell 1.7 percent to $7.51 at the close in New York, while Southwest slid 1.3 percent to $17.57 and US Airways dropped 1.4 percent to $22.08. AMR’s over-the-counter shares gained 0.1 percent to $9.23.
A merger between American, the third-largest U.S. airline, and No. 5 US Airways would create the world’s biggest carrier by traffic. Dallas-based Southwest is the largest discount airline and is now in the fourth spot in the U.S. industry, while New York-based JetBlue is in sixth place.
The Southwest-JetBlue discussions with regulators build on the interest in Reagan National slots expressed publicly by the carriers in the months since Fort Worth, Texas-based AMR and US Airways announced plans to merge on Feb. 14.
Southwest Chief Executive Officer Gary Kelly said on an Oct. 24 conference call that he was “absolutely” interested in more Reagan National access and “more slots at LaGuardia as well.”
“I’m reasonably confident that there will be slots that become available and then I am assuming that there will be an opportunity to bid,” Kelly said. “So if there is that opportunity, we’ll certainly take advantage of the bidding.”
JetBlue wrote U.S. Senator Charles Schumer, a New York Democrat, in March to demand that “a significant number” of slots be divested at Reagan National. CEO Dave Barger said in September that American should have to cede the equivalent of all its current flights there, which would leave the merged airline with the 55 percent market share held by US Airways.
To contact the reporters on this story: David Welch in New York at firstname.lastname@example.org; David McLaughlin in New York at email@example.com; Mary Schlangenstein in Dallas at firstname.lastname@example.org