Bloomberg News

LaGuardia Flights From AMR Sold to Southwest, Virgin America (1)

December 05, 2013

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.”

Southwest is “pleased” with the acquisition of the LaGuardia slots and plans to bid on the takeoff and landing rights being sold separately at Reagan, Chief Commercial Officer Bob Jordan said in a statement.

Promoting Competition

The Justice Department argued in its Aug. 13 lawsuit to block the merger of AMR Corp.’s American and US Airways that the $17.8 billion tie-up would boost prices. In the Nov. 12 settlement, regulators said the New York and Washington flight slots should go to low-cost carriers such as Southwest, Virgin and JetBlue Airways Corp. to promote discount competition.

“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 AMR 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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