As per media reports, airlines in the U.S. have submitted
their bids to acquire slots at Washington's Reagan National
Airport (DCA) as part of the mega-merger deal between American
Airlines and U.S. Airways Group Inc. that led to the formation of
American Airlines Group Inc.
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According to sources, an announcement relating to the sale of the
slots at DCA could be made as early as this week. However, they
remain unclear about the number of carriers that have shown
interest in the bidding process.
In Nov 2013, both American and U.S. Airways got the nod for the
merger after clearing a series of legal hurdles. As part of the
deal, the carriers agreed to give up 52 take-off and landing
slots at DCA and 17 pairs at La Guardia airport (LGA) in New
York. Additionally, the carriers have to divest two gates and
related facilities at each of the Boston, Chicago, Dallas, Los
Angeles and Miami airports.
The Department of Justice (DOJ) argued that the opening up of
slots to rival carriers will enhance accessibility at some of
busiest airports and simultaneously heighten competition. On the
flip side, legacy carriers like
Delta Air Lines Inc.
) has previously insisted that the DOJ should not be biased
toward low-cost carriers while divesting airport slots and
The divesture process has already begun with
Southwest Airlines Co.
) acquiring 22 take-off and landing slots, while Virgin America
acquired 12 such slots at LaGuardia.
Apart from Southwest, Delta and
JetBlue Airways Corp.
) have shown interest in acquiring slots at Reagan National.
Notably, 16 of the 104 slots at DCA are already leased to
JetBlue, and the New York-based carrier will try to purchase as
many slots as possible to strengthen its position in the nation's
Divesture of these important slot pairs will give smaller players
a meaningful opportunity to expand their presence in Washington.
However, it remains to be seen whether Delta will win any slots,
given the inclination of the DOJ toward budget carriers.
Improved operational performance in Dec 2013 has already pushed
the major airline stocks upward. We believe this news could
provide further impetus to investors to remain bullish on these
AAL currently carries a Zacks Rank #3 (Hold).
(We are reissuing this article to correct a mistake. The
original article, issued yesterday, January 13, 2014, should no
longer be relied upon.)