ATLANTA ( TheStreet) -- Delta ( DAL) and US Airways ( LCC) have struck a new slot-swap deal intended to overcome regulators' objections to the deal they proposed in August. In their revised deal, the two carriers offered slots at New York LaGuardia and Washington Reagan National to two of the country's three major low-cost carriers, but avoid offering anything to the largest low-fare carrier, Southwest ( LUV) -- which immediately filed an objection. TheStreet reported three weeks ago that Southwest was
eyeing slots at the two airports and had talked to a Transportation Department official about the mechanics of the slot divestiture the department is requiring as a condition for approval of the original deal. On Monday, Delta and US Airways proposed a compromise on the number of slots to be divested. In general, access to LaGuardia and National benefits an airline and its shares, because access is in short supply and carriers are able to charge premium prices for flights to the conveniently located key airports. Under the revised plan, Delta and US Airways would transfer slots to four low-cost carriers: AirTran ( AAI), JetBlue ( JBLU) Spirit and Canada's WestJet. Three of the carriers would get up to five pairs of roundtrip slots each at New York's LaGuardia Airport, while JetBlue would receive five pairs of slots at Washington's Reagan National. "Each of these airlines have limited or no service (at the two airports)," said US Airways President Scott Kirby, in a letter to employees. The transfer would meet the Federal Aviation Administration's "goals to enhance access for airlines with fewer than 5% of the slots in these key markets," he said. "I know many of you are wondering why we're proposing a new agreement that would still require us to give up slots when they are so valuable to both airlines," Kirby wrote. "While we believe the FAA's ruling forcing us to give up slots is legally questionable, litigation is very costly and time-consuming." Additionally, he noted, the original deal with Delta provides US Airways with slots and gates at Tokyo Narita Airport and in Sao Paulo, Brazil, which would enable US Airways to fly from Charlotte, N.C. to Sao Paulo as well as Rio.
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 get 37 slot pairs at National and Delta would get 110 slot pairs at LaGuardia. That still does not meet the standard the Department of Transportation proposed in its objection. The agency wants divestiture of 20 slot pairs at LaGuardia and 14 at National. In the revised deal, the carriers proposed to divest 15 slots at LaGuardia and five at National -- and to cut out Southwest. Southwest operates eight daily departures at LaGuardia, where it began service in June 2009. It does not fly to National. In its objection, filed late Monday, Southwest said the original deal would have pushed Delta's share of the slots at LaGuardia to 50% from 25%, while pushing US Airways' share at National to 57% from 47%. "Allowing two of the country's largest airlines to collude on trading assets in a way to reduce competition while dramatically increasing their market dominance at two of the United States' most important airports is, on its face, an alarming prospect that should not be permitted," Southwest said. But if there is to be a deal, Southwest said, it should get some slots too. It said that to ensure effective low-fare competition, regulators should require divestiture of least 40 slot pairs at LaGuardia and 20 at National, equating to less than 8% of the slots at each airport. If Southwest were to acquire 20 slot pairs at LaGuardia and 14 slots at National, the annual savings generated in comparison to the incumbents' fares would be $84 million at LaGuardia and $109 million at National, the carrier said. As part of the deal, Delta said that it would build a connection between the existing Delta and US Airways terminals at LaGuardia and that the project, in combination with the new service, would generate as many as 7,000 jobs. At National, US Airways would add 15 new daily destinations and expand its use of large jets by nearly 50%.
Delta and US Airways also said they would drop their effort to swap slots if regulators do not approve the revised deal. The DOT must decide whether letting some but not all low-fare carriers in is better than the minimal low-fare competition that currently exists at the two airports. -- Written by Ted Reed in Charlotte, N.C. .