Why is US unable to use the route authority to GRU borrowed from UA?
I believe there are issues that there is no terminal space (ticketing/check-in/back office) for US to rent at GRU and that the current US treaty limits to four the number of carriers that the US can designate to serve Brazil.. not sure about that though since there are five at GIG (including CO and UA which operate under separate certs right now). The US-Brazil treaty is as complicated and similar to the old Bermuda 2 treaty so it isn’t certain why US has had so much difficulty but Brazil apparently has some legal right to keep US out of GRU.
My bet is that DL is guaranteeing that US will be able to operate in GRU by 2015 w/ 2 flights/day if no other way than by ground handling and/or sub-leasing slots and office from DL which has apparently been able to expand its presence at GRU…. It may be that US will be able to accomplish its presence at GRU on its own, in which case DL might have to pay something more to US but it appears at the least that DL will ensure that US can eventually expand at GRU.
I think there are other strategic aspects of how GRU fits into this slot deal but I’ll save my comments until something becomes apparent.
WT, If I can add a few follow-ups to your list:
#1: I would suspect, and hope, that you end up being right on this one
#2-3: The % of slots at DCA, as well as the % of slots held by the largest LCC at LGA, has risen in the past year but the % of slots held by the largest carrier at both airports will still be too high according to the initial DOT ruling. I, like you, would argue that the competitive landscape has changed over the past 2 years, but I'm just playing devil's advocate here.
On this note, the more and more I read about the DOT's original decision, the more comical it gets. I've made my opinion on most of the matter abundantly clear so I won't re-type it all out here, but I was always confused why specific wording was "carriers with less than 5% of the slots" as opposed to the otherwise typical "limited incumbent" wording. Well, as it turns out, FL (and now WN, presumably) do not qualify for limited incumbent status at DCA because FL has previously relinquished slots which count against its total. One last point, if the DOT keeps the original wording of "carriers with less than 5%" I believe this would disqualify FL/WN at LGA, as the combined entity had just over 5% of the total slots by my calculations. It will interesting to see how this all plays out; I suspect the DOT will revise its ruling so that all LCCs and, perhaps, any limited incumbent will now be eligible.
#4: I'm baffled by what was written in the press release. It seems there will be a total of 29 jetways at Terminal C/D (I have no idea how many additional parking positions there are) and if yes, if you add DL's total, it makes it appear as if they will have 27 of those, but that simply can't be true. There is no way that US can operate 2 hourly Shuttle operations and what is effectively an hourly CLT operation from 2 jetways. They will likely need 5-6 gates. My guess is that when it states that DL will take 18 gates in Terminal C, is that DL will take 18 total parking positions (jetways/hardstands) in Terminal C.
#6: Interesting statistic. I would note that the landscape at EWR could very well change pending a change in scope agreement at the combined UA/CO. CO has for years been operated single-class 50 seat planes on several EWR routes that could likely be better served by 70-90 seat dual class aircraft.
#8: Re GRU: Evidently US has had difficulty obtaining ticket counter space in addition to access to a suitable slot time, so that would partially explain why it was easier for DL to launch a 3rd GRU flight, than it is for US to launch its first flight. I did find it interesting that US was touting the fact that it could allow it to operate 2 daily GRU flights from 2015, but they don't mention that the current lease with UA only lasts until 2015 as it stands now. So in reality, this may just be an insurance bet that come 2015, US can continue to operate at least 1 GRU flight in the event that the lease is not renewed (not an unlikely possibility, all things considered).
It is foolish – and only the work of those who don’t want to see this deal go through to think that DL and US didn’t work w/ the DOT to come up w/ an agreement that the DOT could approve. DL is giving up more slots than it originally said it would at LGA but appears to have been successful in limiting the pool of potential carriers that could use them….
DL and US will both operate a substantial portion of slots at LGA and DCA but low fare competition at both of those airports and the region as a whole is stronger than it was years ago… the fact that WN uses larger aircraft and has the 738 on order makes it possible for LFCs to have a large enough size in both markets to prevent the possibility of a single carrier dominating the market – which is the only reason why the gov’t is involved in this slot deal. Other carriers control larger shares of the market in their hubs but there are generally slots and gates available to allow competitors to grow, something that is not as much a given at LGA and DCA. Transferring more than 10% of the slots in the transaction at both airports ensures that LFCs will continue to grow; whether it is B6 and WN is not necessary to ensure low fares.
As for the LGA terminal situation, it remains to be seen how the details will play out but the bottom line is clear that US is giving up the majority of its terminal to DL while US will use a pretty small part of that terminal. I suspect there will be some pad operations by both DL and US which will allow some double counting of gates/parking positions (note the language does not exclusively say “gates”). It would appear that one of the big “wins” for DL is getting lots of gate space at LGA… apparently gate swaps are not a problem at DCA.
As for the impact of the slot deal, I think you also need to consider what the incremental flight additions will do for each airline. Proportionately, US already has a better developed hub at DCA than DL or anyone else does at LGA. But US has some key market opportunities they could develop and I expect they will move quickly to go after them (note that US says they will add in markets where other carriers currently serve). In contrast, DL has the ability to pick up a lot of slots that are being very inefficiently used at LGA and use them by connecting traffic through LGA (something US was unable to do because most of the slots were used by them WITHIN the NE where it wasn’t possible to connect)… DL has enough of a presence from LGA to Florida and other destinations that they can build a true hub which will allow them to add flights in much more competitive markets (again, most likely heavily skewed to other airline hubs) that they could not “win” in if they had to fly them on a point to point basis.
US is flying a number of very short haul flights from LGA that don’t carry hardly any local passengers (MDT, PVD, ALB) that DL will undoubtedly drop and use for markets that have more LGA local market potential (would you really want to try to fly to NYC from these cities?)... The NE is just more densely populated than the mid-Atlantic soUS doesn’t have that same problem w/ DCA so the slots they gain can be used more efficiently for longer haul, higher value destinations right away.
Notice that the majority of the revenue for both carriers (US at LGA and DL at DCA) comes from markets that will remain so it comes down to using the incremental new flights to increase the performance of the hub as a whole, which in many cases will allow both carriers to serve markets which they otherwise couldn’t enter.
As for DL at LGA vs CO at EWR, DL is clearly using this deal to shift traffic where it can have an advantage to LGA which generates higher value revenue on comparable routes. Because UA is stronger from LGA and JFK to the western US, DL can’t overcome that advantage w/ the slot deal but LGA slots can be used to serve much of the US west of the Rockies which is where the majority of revenue comes from. CO might add larger RJs – and likely will but DL will have an operation at LGA and enough slots to likely maintain an advantage over CO/UA in the markets where DL can compete from LGA. IN addition to the west coast, UA/CO will have an advantage to Asia and Latin America but it is possible that DL’s growth at JFK could narrow that advantage – it will at least be something that DL will have to do outside of the slot deal.
There is also a decent chance that US can convert some of its DCA slots to long haul which will increase the value of US’ slots. It is doubtful that there will be perimeter exemptions at LGA.
USFlyer said: "Umm, so I just compared this to the 2009 plan. In 2009, DL was to pick-up 125 slots at LGA and US was to pick-up 42 slots at DCA. This deal seems to go in the opposite direction, with US giving up more at LGA to DL. How on earth will this satisfy the regulators? Seems like DL only gets more concentrated at LGA than previously proposed. What am I missing?"
USA320Pilot comments: The deal gives Delta 132 LGA slots and permits Delta to give up 16 LGA slots, if required by the DOT. In my opinion, the deal provides for divestitures the parties believe the DOT may require. 132 slots minus 16 = 126 slots or about the same number Delta obtained in the 2009 deal. The difference is that US Airways will no longer fly LGA-GSO and is effectively being given $66.5 million for the loss of this market; as well as payment for Gate 8 and 9 that the parties apparently had disagreement about. Another words, US Airways sold Gates 8 and 9 and the GSO slots that may be required to be provided to the DOT for assignment to other carriers.
It appears US Airways will operate from Gate 1, which will provide 3 remote spots for Express or EMB-170 flights to PIT and PHL, gate 2 and 3 could be used for mainline CLT A321 flights and gates 4, 5, 6 & 7 could be used by the Shuttle.
The good news is that US Airways will have its LGA operation in one building versus split with the MAT, the company can have limited connections through LGA for relief, the company will obtain a new LGA Club, and there will more mainline service to from DCA. In addition, the Company is positioned to more effectively use its new DCA slots to fly beyond the DCA perimeter if the FAA reauthorization bill is passed and to expand other DCA mainline flying.
I also believe this deal reduces future merger anti-trust issues with American in NYC and United in EWR; as well as provide DCA slots that could be surrendered if a future merger is attempted with United.
I’m not sure DL really wanted to keep its Shuttle in the Marine Air Terminal and would benefit from being able to connect to/from its own Shuttle… but DL is more focused on getting enough gate space at LGA than moving the Shuttle, which they apparently are comfortable can remain as a standalone operation.
I think you are right that US is not only doing what it needs to do to make its presence in the NE work NOW but also sets itself up even more for a merger in the future, esp. given that the most likely merger partners already have larger operations in NYC.
I don’t think either a merger with UA or DL is in the cards for US.
The new plan is interesting to say the least. After the experience with the first round, one has to assume that they had some guidance from the DOT in this revised plan....but with US who knows?
So it says that DL will take control of 18 gates in Terminal C plus 1 in Terminal D, while US will operate out of 9 gates and parking positions at Terminal C. Am I missing something or would this lead to DL ground handling of US at Terminal C, or would these gates be dual use? What is the difference between "control" and use? Also I am somewhat that the Marine Air Terminal did not change hands.....US has little if any need for connections serving only DCA, BOS, PIT and CLT one would think...
One would hope this would finally mean that US can begin the ISP-DCA service they keep trying to initiate......
As to the merger speculation, I don't think there is any need or desire to merge with UA--I think AA will be the proper dance partner looking forward...but I am still not sure which will be the acquiring partner....
My BEST to you all...
I don’t think there is any reason to think that US will be ground handled by DL… dual use or the use of parking positions instead of hard gates is more likely.
You can start the speculation on what markets US can add with their new slots but ISP-DCA seems as reasonable as a lot in the NE… I don’t think it will be on anyone else’s radar.
