Competition in the Skies: Is Delta the Problem, or the Solution?

[700UW]

http://blogs.wsj.com/corporate-intelligence/2014/03/10/competition-in-the-skies-is-delta-part-of-the-problem-or-a-potential-solution/?mod=yahoo_hs
 

The decision to exclude Delta from the divestiture process in order to favor Southwest and other DLCs is not a decision in favor of competition. Instead, it is a policy decision favoring the DLC business model over the network carrier business model, even though the DLC business model cannot and does not serve all types of markets or all kinds of travelers.
 
Simply put, it is a decision that shields DLCs from competition with Delta. The Government’s plan to use the divestiture to “tilt” the market in favor of DLCs is contrary to the public interest, is based upon misconceptions about the nature of competition in the airline industry, and is an inappropriate Government manipulation of the market that will lead to anticompetitive outcomes in affected cities.
 

 

 

In response, the DOJ says — and we’ll paraphrase here — that Delta is part of the problem of dominant carriers limiting competition, and therefore can’t be part of the solution. “In cases involving allegations of coordinated effects arising from a proposed merger,” it says, “divestiture assets should not be acquired by firms that are part of the oligopoly.”
 
Or in slightly longer form:

The allegations of coordination among the legacy carriers fully justify the United States’ discretionary decision to direct that the divestiture assets be sold to firms that are unlikely to follow industry consensus, in this case the LCCs. The goal of the divestiture remedy is to enhance the ability of the LCCs to frustrate coordination among the legacy carriers. Allowing Delta to acquire divestiture assets would undermine the effectiveness of the remedy to accomplish this goal and, given Delta’s status as the second largest slot holder at Reagan National, would exacerbate the slot concentration issues at that airport.

 


 

 

[WorldTraveler]

I'm not sure who gave you a negative mark, 700, but I just reversed it. 
 
 
 
this highlights that the conversation has already started in earnest and will escalate about who benefits when trade is restrained.
 
The article also highlights that the original charge by the DOJ that legacy carriers coordinate actions to the detriment of consumers is completely unsupported by the DOJ.
 
Low fare carriers use the exact same pricing protocols that legacy carriers use.  Anyone who argues that low fare carriers provide a structurally different solution from the legacy carriers doesn't know the industry at all.
 
The DOJ"s whole argument of an oligopoly rests on their charge - unsupported - that a few players in an industry work together against the consumer.  They haven't proven it.
 
It was AA and US who made statements about what the merger would do to prices, not DL and not UA. 

 

[swamt]

It all boils down to DELTA DID NOT meet the requirements set forth by the DOJ in wining the bids for the divested gates by AA.  Delta is NOT a LCC.  And Delta would caused the same harm, as far as competition, as if AA kept said gates.  And by this I mean ALL gates that AA is being required to divest.  The article previously posted shows that Delta wanted gates at DCA and LGA, but they never met the requirements set forth.  Therefore, they, Delta will not meet the requirements for ANY of the other gates that AA is required to divest...

 

[WorldTraveler]

you keep saying that if it makes you feel better.
 
WN DIDN't meet the requirements to serve DAL in the first place but they fought one legal battle after another.
 
It is beyond ironic that an airline that has litigated over one airport as much as WN has should think they have now marked the territory enough time that no one else will ever dare to challenge it.
 
I think Georgia is working on a law today that airlines that don't have HDQ there will not have access to gates at its airports. 

 

[swamt]

It does make me feel better, I admit it.  The reason is, I do believe we had a bet, and we all now know Delta will not receive the gates, and I think you said you would admit you were wrong if the time came, well time is here.  Well maybe not set in stone yet, but Delta has been notified by DOJ already because Delta has responded...
 
Hey 700, if you get a chance there's two articles out there that really does an accurate explanation of the differences the three airlines applying.  One is DMN, and one is WSJ.

 

[WorldTraveler]

the agreement was if WN won the gates and DL didn't.
 
The case is not settled yet either.
 
since you didn't link to or provide text to DL's response, I will note it.
 
“It is Delta’s unwavering position that the two gates in question at Dallas Love Field should return to the City of Dallas to be managed by the city for common use,” Delta spokesman Trebor Banstetter said.
“The city has the right under American’s lease and the five-party agreement to require that these gates revert to the city as common use gates,” he said.
“Officials of the City of Dallas are uniquely positioned to decide what to do with these gates based on what is best for their citizens and businesses,” Banstetter said.
“If the gates revert to the city, competition will be enhanced. Love Field will be able to accommodate all the carriers that want to serve it,” he said.
The five-party agreement to which Banstetter refers was the 2006 deal to open up Love Field in 2014, signed by the cities of Dallas and Fort Worth, Southwest Airlines, American Airlines and Dallas/Fort Worth International Airport.

 

[swamt]

I will not do your homework for you or others, therefore, I do not post links or quotes as you do.  It's already known in the public that the DOJ has in fact said that Delta is not a prime recipient.  And it is now down to SWA and VX, UNLESS, there is another bidder coming in late, which I still think there is a strong possibility. 
And as you already know, Delta has already responded to the DOJ's statement that DL is NOT going to receive said gates at LF. 
The question now is will SWA better nego their reasons for getting the gates than VX.  WHO will bring the most desired results to Dallas and the flying public as far as competition is concerned.  Remember LCC's are the only considerations for all the gates that AA and US is required to divest by the anti trust suit...

 

[robbedagain]

swamt  I would imagine may be allegiant  or b6 or may be spirit to put in for dal  but I do know spirit is at dfw  but not sure if b6 goes to dallas at all   or even allegiant   I think  if I were a betting man   id probably go with allegiant as theyre well known to go into those smaller airports   but that's just me

 

[eolesen]

Remember LCC's are the only considerations for all the gates that AA and US is required to divest by the anti trust suit...

Not entirely true. WT has rung the "LCC's are the only ones" bell so many times even you're believing it.

DOJ's focus and intent appears to be increasing access for new entrants at those airports.

Most LCC's certainly meet that definition, but so do higher cost carriers like AS or HA.

 

[WorldTraveler]

the DOJ specifically used the term low cost carriers in their divestiture press release
 
http://www.justice.gov/opa/pr/2013/November/13-at-1202.html
 

" The Department of Justice today announced that it is requiring US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp. to divest slots and gates at key constrained airports across the country to low cost carrier airlines (LCCs) in order to enhance system-wide competition in the airline industry resulting in more choices and more competitive airfares for consumers."

 

[eolesen]

Whatever. They're still focusing on the cost aspect, and not their fare structure.

Had AS or HA been interested, they'd have been considered for the assets. The only carriers locked out were the uber-dominants.

 

[WorldTraveler]

maybe one of them will throw their hat in the ring... AS now has to decide if it they want to allow WN to have a straight shot to their hub from an airport that AS can't serve.

The principle remains the same... companies, including AA, that rely on niches that other carriers CAN'T enter eventually will face competition that will be far stronger and more capable of inflicting damage.

WN like AA has tried 30 ways to Sunday to find airports and markets where other carriers cannot fully compete with them.

The evidence is overwhelming that those carriers who can win against any competitor thrive long term over those who rely on closed markets.

And it is still very possible and likely that those uber-dominants will simply be emboldened to go for the open but core markets of those closed market loving airlines and win in those markets anyway.

 

[topDawg]

It all boils down to DELTA DID NOT meet the requirements set forth by the DOJ in wining the bids for the divested gates by AA.  Delta is NOT a LCC.  And Delta would caused the same harm, as far as competition, as if AA kept said gates.  And by this I mean ALL gates that AA is being required to divest.  The article previously posted shows that Delta wanted gates at DCA and LGA, but they never met the requirements set forth.  Therefore, they, Delta will not meet the requirements for ANY of the other gates that AA is required to divest...

WN doesn't meet the requirements. Your company isn't a LCC anymore......Just for some reason your the Obama adm. love child of an airline. 
 
 
 

Not entirely true. WT has rung the "LCC's are the only ones" bell so many times even you're believing it.

DOJ's focus and intent appears to be increasing access for new entrants at those airports.

Most LCC's certainly meet that definition, but so do higher cost carriers like AS or HA.

Had VX not bid then I imagine DL would have got them. (or taken the DOT/DOJ to court if WN got them)  
 

maybe one of them will throw their hat in the ring... AS now has to decide if it they want to allow WN to have a straight shot to their hub from an airport that AS can't serve.

The principle remains the same... companies, including AA, that rely on niches that other carriers CAN'T enter eventually will face competition that will be far stronger and more capable of inflicting damage.

WN like AA has tried 30 ways to Sunday to find airports and markets where other carriers cannot fully compete with them.

The evidence is overwhelming that those carriers who can win against any competitor thrive long term over those who rely on closed markets.

And it is still very possible and likely that those uber-dominants will simply be emboldened to go for the open but core markets of those closed market loving airlines and win in those markets anyway.

WN stays away from the majors, minus UA, because they constantly get the crap kicked out of them US at PHL, DL at ATL, DL at SLC, AS at SEA, US is also holding its own at PHX. 

 

[swamt]

topDawg, please.  SWA is in fact a LCC.  They always have been, and will continue to be so. If you believe they are not a LCC please provide info saying different.
 
Delta would have not received said gates if it were narrowed down between SWA and Delta.  Delta, has not met the requirements of the DOJ's requirements in order to bid for them, and the DOJ has release a statement stating this.
 
VX is the best, so far, bidder for said gates besides SWA.  VX is considered a LCC, but they will not be able to supply the number of seats as SWA will be able to.  But, VX will be the best competitor to SWA for the gates.  This is why I say it could go either way at this point.  As we all will, stay tuned as the results will be out soon...

 

[WorldTraveler]

WN is not a low cost airline unless DL is and UA is not... the difference in costs between DL and UA is higher than it is between DL and WN.
 
The whole notion of costs as a determinant of who has access to gates is a myth.
 
And if it comes down to pricing, the legality of the US government selecting companies based on their ability to lower fares is highly questionable. 
 
VX will likely get the gates, will flail around for several years but will be able to pull off an IPO based on the promise to investors of greater profits.
 
They'll deal with market realities later. 
 
The real results are not who wins the gates but who wins in the market.