Southwest Airlines Co.
JetBlue Airways Corp.
) announced that they have won bids to purchase take-off and
landing slots at Reagan National Airport (DCA) in Washington. The
slot divestment is 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.
Southwest Airlines has won bids for 27 pairs of slots, while
JetBlue will take over 12 such slot pairs and obtain additional 8
pairs in DCA, which is currently being leased from American
Airlines. However, the financial details of the deal were not
disclosed and are subject to final approval by the U.S. justice
The slot win will expand Southwest's daily departure from DCA
to 44 from the present 17. Also, the company expects to declare
new flight details later in the quarter with services starting
from the third quarter.
On the other hand, JetBlue announced its intention to activate
30 roundtrip flights from DCA as against the current 18. The
increased number of flights will cover new destinations. The news
was greeted positively by the shareholders of Southwest and
JetBlue, as both the stocks ended in green with 2.96% and 5.75%
Notably, in Nov 2013, both American Airlines and U.S. Airways
got the nod for the merger after clearing a series of legal
hurdles. As part of the agreement, 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. Notably, American Airlines still needs
to vend 5 more pairs of slots at DCA to fulfil the terms of the
The Department of Justice (DOJ) argued that the opening up of
slots to rival carriers will enhance accessibility at some of the
busiest airports and simultaneously heighten competition. The
divesture has already begun with Southwest acquiring 22 take-off
and landing slots while Virgin America took over 12 such slots at
the busy international airport of LGA. Southwest has been
significantly benefitting from the slot divesture demanded by the
For quite some time DCA has been a very popular and high fare
airport serving the political and business commuters of
Washington. Both Southwest and JetBlue intend to bring down
airfares to and from DCA.
We believe the deal will present a win-win situation for both
the carriers as they will not only gain additional slots, but
also get a significant share of the Washington air service market
with competitive ticket pricing. However, consumers will be the
biggest gainers from the heightened competition as it will result
in low average fares.
Southwest sports a Zacks Rank #1 (Strong Buy), while JetBlue
carries a Zacks Rank #2 (Buy). Another stock worth considering
within this sector is
United Continental Holdings Inc.
), which carries the same Zacks Rank as Southwest.
AMER AIRLINES (AAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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