Why the American Merger Deal Could Make Virgin America a Big Winner

DALLAS (TheStreet) -- Six-year-old Virgin America saw a big opportunity when the Justice Department required divestitures from American (AAL) and US Airways in return for allowing them to merge.

Virgin America already has won the right to operate six daily round trips at New York's LaGuardia Airport and four at Washington Reagan National, using slots that American and US Airways were required to divest.

On Wednesday, the San Francisco-based carrier said it will seek two gates at Dallas Love Field that American was required to divest. Delta (DAL) and Southwest  (LUV) are also seeking the two Love Field gates. Southwest already occupies 16 of the 20 Love Field gates.

Virgin America said that if it is awarded the gates, it would begin new service from Dallas to LaGuardia and National. Arguably, that represents a convincing case to the Justice Department that consumers would derive maximum benefit from the merger.

In particular, Love Field-National service by a new low-fare entrant would provide an alternative to American service on what became hub-to-hub flying in the merger, when Dallas Fort Worth International Airport and Washington National became hubs for the same airline. Hub-to-hub flying is typically an area where ticket prices are high.

Like LaGuardia and National, Love Field is a desirable and constricted close-in airport. It is just six miles from downtown Dallas. In October, flight restrictions imposed in 1979 will be lifted. Southwest has already said it would add flights to LaGuardia and National. Delta has said it will add LaGuardia and LAX if it gets the two gates.

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