Bloomberg News

LaGuardia Flights in AMR Merger Go to Southwest, Virgin America

December 05, 2013

Southwest Aircraft at New York’s LaGuardia Airport

Winning LaGuardia access would let Southwest Airlines Co., the biggest discounter, expand at the airport closest to central Manhattan and give Virgin America Inc. a toehold there. Photographer: Jin Lee/Bloomberg

Southwest Airlines Co. (LUV:US) and Virgin America Inc. are poised to add flights at New York’s LaGuardia Airport as American Airlines and US Airways Group Inc. pull back there to settle the U.S. antitrust lawsuit against their merger.

Southwest, the biggest discount carrier, will buy 12 new flight slots, enough for six daily round trips, along with 10 slots now leased from American, the Federal Aviation Administration said in a regulatory filing. Virgin America will get 12 flight slots.

The FAA said it approved the transactions after the U.S. Justice Department required that American and US Airways divest flight rights as a condition of their merger, which is set to close on Dec. 9. Talks are under way on how American and US Airways will divest slots for 104 daily flights at Washington’s Reagan Airport, two people familiar with the matter said.

“We’re excited to have the opportunity to serve LaGuardia,” Madhu Unnikrishnan, a Virgin America spokesman, said today in an interview. “We’ll release more details on our network plans in the weeks ahead when the DOJ process is finalized.”

Federal regulators had said the flight slots should go to low-cost carriers such as Southwest, Virgin and JetBlue Airways Corp. to ensure that discount competition would be sustained at LaGuardia and Reagan. The Justice Department argued in an Aug. 13 lawsuit that the $17.8 billion merger would boost prices.

‘Better Way’

“If that was their goal, to make lower fares available, this was a better way to achieve it than to require American to maintain a certain level of fares,” said Savanthi Syth, a Raymond James Financial Inc. analyst in St. Petersburg, Florida. “We’re not surprised that Virgin wanted a presence at LaGuardia.”

LaGuardia, Reagan, New York’s Kennedy and New Jersey’s Newark Liberty are the major airports with U.S. flight caps to help damp congestion, making takeoff and landing rights a prized commodity.

LaGuardia slots would let Dallas-based Southwest expand at the airport closest to central Manhattan and offer a toehold there for Burlingame, California-based Virgin America, which serves Kennedy and Newark Liberty.

The new American will become the world’s biggest airline once the merger closes as American parent AMR Corp. exits bankruptcy. American Airlines Group Inc. will be led by Doug Parker, 52, now US Airways’ chief executive officer, while American CEO Tom Horton, 52, steps aside to become chairman until the merged carrier’s first annual meeting.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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