Delta, US Airways to Appeal Slot Ruling

WASHINGTON (TheStreet) -- Regulators say Delta(DAL) and US Airways(LCC) must come up with more slots for low-fare carriers if they want to complete a slot swap at Washington Reagan National and New York LaGuardia airports.

But the airlines, whose compromise proposal was rejected, said they will appeal the Department of Transportation's ruling in the U.S. Court of Appeals.

In a ruling issued Tuesday, the Transportation Department rejected the two carriers' proposal to offer 15 slots at LaGuardia and 4.5 slots at National to low-cost carriers. It stood by its requirement that they divest 20 slots at LaGuardia and 14 at National.

"The carriers have not demonstrated that these voluntary divestitures should or would reasonably assuage the competitive concerns we expressed," the department said.

Moreover, even the limited slot transfers the two carriers offered would have been implemented slowly, the department said, with transfers at LaGuardia to AirTran(AAI) and Spirit requiring up to two years, at the recipients' discretion, and a transfer to WestJet occurring within 28 months.

The transfer of 4.5 National slots to JetBlue(JBLU) would occur quickly, but for an unspecified period Delta would continue to utilize the slots. JetBlue would seek an additional half slot from the Federal Aviation Administration to enable its round-trip operations.

In a joint statement Tuesday night, Delta and US Airways said they are disappointed that the DOT and FAA rejected a proposal that would provide clear consumer benefits in both the Washington, D.C. and New York markets. "There are no winners in this decision -- consumers lost, communities lost and our employees lost," the carriers said. "Even our competitors lost.

"Upon review of the just-issued order, we believe the DOT and FAA's decision is inexplicable and has clearly exceeded their statutory authority," which forms the basis for an appeal, the two carriers said.

In the original deal, Delta agreed to give US Airways 42 slot pairs at National in exchange for 125 slot pairs at LaGuardia. In the revised deal, US Airways would have gotten 37 slot pairs at National and Delta would get 110 slot pairs at LaGuardia. The Transportation Department wants US Airways to get 28 slot pairs at National and Delta to get 105 at LaGuardia.

The slot exchange request was filed in August. In March, Southwest filed a response, complaining that it was cut out of the deal to offer slots to low-cost carriers, even though it is the biggest low-fare carrier.