American Air Deal Could Bring Reagan National 2.5M More Passengers Yearly, Expert Says

WASHINGTON (TheStreet) -- A new study forecasts that Washington's Reagan National Airport will see a dramatic increase in passenger traffic, much of it at the expense of neighboring airports, due to divestitures accompanying the merger that created the new American Airlines  (AAL).

Passenger totals at National could rise by 2.5 million annually, said aviation consultant Sandy Rederer, a former TWA vice president for planning, who prepared the study for his clients.

The divestures will mean that bigger aircraft will serve National, Rederer said. The airlines that take over the slots will likely fly airplanes that are bigger than the regional aircraft now using them, and the new American will likely replace regional aircraft with bigger airplanes on some of the routes it keeps.

National "could easily get 2.5 million additional annual passengers and possibly more," Rederer said. "If the 44 divested slot pairs add 100 seats per operation (150 seats vs. 50), that would be 8,800 seats per peak day or around 3.2 million seats per year, (and) 3.2 million seats at 80% occupancy would mean 2.5 million annual passengers."

The airlines that acquire the slots would likely use Boeing 737s or Airbus A320s rather regional jets that now use the slots.

"In addition, if American up-gauges most remaining RJ and Dash-8 operations from 50 seats to 70, that would mean another 700,000 or so annual seats," Rederer said.

Rederer estimated that about 70% of the new traffic would represent passengers switching from Dulles to National, while 25% would switch from Baltimore/Washington to National. Another 5% would represent new traffic stimulated by low fares, he said.

The airport-to-airport shifts would also reflect lower fares at National, which would become equal to or lower than fares at the other two airports, enabling National to reap the benefit of its more central location. Southwest (LUV), which has about 60% of the domestic traffic at BWI, might simply see some of its passengers shift from one airport to the other.

In 2012, Baltimore/Washington International had about 22.5 million passengers, Washington Dulles had about 22 million and National had about 19 million. If fully realized, the potential changes resulting from divestiture could make National the busiest of the three airports.

In return for the Justice Department's agreement to withdraw a lawsuit contesting the merger, American and US Airways agreed to give up 104 slots at National, including 16 currently leased by JetBlue (JBLU). The 88 slots that become available would allow for 44 daily departures. American would sell slots to carriers on a list approved by the Justice Department. Southwest has said it will bid for at least some of the slots.

Today, US Airways operates 243 daily departures at National, while American operates 51. After the merger, the new American will operate 250 daily departures at National. By percentage, US Airways operates 55% of Reagan National slots today and new American will operate 57% after the slot transfer is completed.

Rederer said American will have various ways to mitigate the impact of the divestiture. In particular, American can use bigger aircraft to fly to Raleigh Durham, which has 177 monthly flights on American and 228 on US Airways, and to Nashville, which has 135 weekly flights on American and 119 on US Airways.

Among airports, Rederer said, "Charlotte seems to be a clear winner with strengthened hub presence in the Northeast and potentially new routes to Latin America. I think LAX also gains, with a stronger AA better able to continue the competition with United  (UAL) and Delta (DAL) .

"Phoenix could pick up some traffic flow to and from Mexico but will probably lose some domestic flow where it competes with DFW," he said. "And Raleigh/Durham may lose flights, given the competition with the Charlotte hub."

Written by Ted Reed in Charlotte, N.C.

To contact this writer, click here.

Follow @tedreednc

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