Bloomberg News

JetBlue Said to Win U.S. Auction of New York, Washington Flights

December 06, 2011

Nov. 24 (Bloomberg) -- JetBlue Airways Corp. beat rivals that included Southwest Airlines Co. to win an auction for new flights at New York’s LaGuardia airport and Reagan airport in Washington, two people familiar with the matter said.

JetBlue will receive eight pairs of takeoff and landing slots at each of the airports, said the people, who weren’t authorized to comment publicly about the U.S. Transportation Department auction. WestJet Airlines Ltd. said yesterday it won the auction for eight other slot pairs at LaGuardia.

Southwest, the biggest discount carrier, is almost three times as large as JetBlue based on passenger traffic. Dallas- based Southwest had said it would bid for flights at both LaGuardia International and Ronald Reagan National, where federal rules limit the number of takeoffs and landings.

“They’re probably pretty disappointed at Southwest,” Bob McAdoo, an Avondale Partners LLC analyst, said in an interview. “Southwest has some nice slots, but they don’t have that good a position. These kinds of auctions don’t come around that often.” McAdoo rates the shares “market perform.”

Brandy King, a Southwest spokeswoman, declined to comment. Southwest had eight daily LaGuardia flights and obtained 20 more when it bought AirTran Holdings Inc. in May, a deal that also brought 12 daily departures from Reagan.

Airlines can expand or start flights at LaGuardia and Reagan only by securing flight slots. The airports are prized by carriers because each is popular with business fliers who typically buy the most-expensive tickets.

Delta, US Airways

The airlines bid on slots that Delta Air Lines Inc. was required to surrender to win U.S. approval for a trade of the flight spots with US Airways Group Inc. at the two airports. The auction may be the biggest for landing rights at LaGuardia and Reagan, according to Sandy Rederer, a principal at consultant Aviation Planning & Finance in Washington.

JetBlue’s winning bids totaled $72 million, while Calgary- based WestJet bid $17.6 million, according to data on a government website. Mateo Lleras, a spokesman for New York-based JetBlue, declined to comment.

“It will be interesting to hear JetBlue’s plans for its slots,” said Jeff Straebler, an independent airline analyst in Stamford, Connecticut. “Additional flights to Florida wouldn’t appear to justify the price, and JetBlue doesn’t have a hub that can use the feed from LaGuardia and National as Southwest does.”

JetBlue has as many as 11 daily flights from LaGuardia and nine from Reagan. The airline has the most daily domestic flights from New York’s Kennedy airport.

‘Dark Horse’

“WestJet was always the credible dark horse at LaGuardia, given a strong cash position and it’s stepping up competition against Air Canada for ‘golden triangle’ traffic -- Toronto, Montreal and Ottawa,” Straebler said. “LaGuardia service to any of these cities will be a nice complement.”

Securing the flight slots was a “once-in-a-lifetime opportunity,” WestJet Chief Executive Officer Gregg Saretsky said in a statement. “Our ability to serve New York demonstrates we are focused on delivering on our business traveler strategy.”

The other registered bidders were Frontier Airlines, a unit of Republic Airways Holdings Inc.; Spirit Airlines Inc.; Allegiant Travel Co.; and closely held Sun Country Airlines Inc.

Auction Rules

Under rules set for the auction, airlines or affiliates already holding a certain amount of slots couldn’t participate.

The rules say the government won’t identify winners until carriers complete the sales, which must be done by Dec. 1. The Transportation Department declined to comment further, spokesman Bill Mosley said in an e-mail.

US Airways and Delta are awaiting approval from the Port Authority of New York and New Jersey to complete the LaGuardia side of the swap, after securing federal consent.

The Transportation Department also approved the Reagan portion, although the U.S. Justice Department has yet to sign off. The airlines have said they hope to close the transaction this year.

The exchange would give Atlanta-based Delta 132 more pairs of LaGuardia slots, assuring control of more than half the flights there. US Airways, based in Tempe, Arizona, will get 42 pairs at Reagan, $66.5 million in cash and an additional daily route to Sao Paulo and will scale back unprofitable operations at LaGuardia.

--Editors: Niamh Ring, Ed Dufner

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Alan Levin in Washington at alevin24@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net


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