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Southwest Checks Out LaGuardia and National

DALLAS ( TheStreet) -- Southwest (LUV - Get Report) is eyeing slots at New York LaGuardia and Washington Reagan National airports.

Two Southwest executives recently questioned the mechanics of slot sales that would be required as a condition to the Transportation Department's approval of a proposed deal between Delta (DAL - Get Report) and US Airways (LCC), according to a report filed with the department.

In the deal, proposed in August, US Airways would have gotten 42 slot pairs at National and other assets including slots at Tokyo's Narita Airport, while Delta would have gotten 125 slot pairs at LaGuardia. The transaction would have further strengthened each airline at an airport where it is already strong.

The DOT said last month it would require slot divestitures at both airports. The airlines would have to give up 14 of the 42 slot pairs at National and 20 of the 125 slot pairs at LaGuardia and to sell them to carriers that control fewer than 5% of the slots at each airport. The airlines said they would review the proposal, but noted that "if this order is implemented as proposed the transaction will not go forward."

In the filing last month, Rebecca McPherson, DOT assistant chief counsel, said she participated in a Feb. 12 conference call with two Southwest executives, who called with questions regarding the divestitures. The questions concerned the mechanics of a slot sale, "whether an interested carrier could purchase multiple slot packages at each, either or both airports," and whether Delta and US Airways would "provide gates so that the purchase of slots world result in the acquiring carrier being able to initiate or expand service."

Southwest spokeswoman Beth Harbin said "we had some questions about the (DOT decision) and the mechanics of a slot sale, should there be one." Harbin said Southwest will file comments with the DOT and noted that the carrier has not formally declared an interest in slots at either airport. Southwest operates eight daily departures at LaGuardia, where it began service in June 2009. It does not fly to National.

In its ruling, the DOT said the divestitures were necessary because, at both airports, it is likely that the proposed transaction would make the dominant airline even more dominant and more able to increase fares --- which are already high compared with other airports in the same area.

Currently, National has a total of 832 slot pairs, while LaGuardia has 1,143. The DOT said that with its proposed divestitures, US Airways would have 51% of the slots at National, while Delta would have 45% of the slots at LaGuardia.

-- Written by Ted Reed in Charlotte, N.C. .

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