Southwest Interest in LGA and DCAl Slots if Delta and US Complete Swap
- Thread starter Dont call me Shirley
- Start date
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
US more recently and DL for quite some time have done a pretty good job of holding their ground accept low fare carriers.
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Remember also that the proceeds from the slot transactions go to DL and US - and some have reported that the slot divestitures might be coming only from the DL side because of the larger number of slots DL gets in the deal... thus DL will receive revenue from the airlines that win the rights to use the slots... and I suspect DL and US are happy to see a feeding frenzy in the form of words by airlines saying "we intend to bid aggressively".
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Remember also that the proceeds from the slot transactions go to DL and US - and some have reported that the slot divestitures might be coming only from the DL side because of the larger number of slots DL gets in the deal... thus DL will receive revenue from the airlines that win the rights to use the slots... and I suspect DL and US are happy to see a feeding frenzy in the form of words by airlines saying "we intend to bid aggressively".
Since WN and FL are still seperate companies wonder if WN and FL both could bid on those slots in LGA.
Seperate operations, not seperate Companies... cause lets face ,,any way you want to slice it,, the check signed for those gates would be coming from 1 Love Field....I think those people in New York would see right through that,,
Would be funny if SWA and AT got into a bidding war with themselves,,, Gary Kelly might not think so..
...Would be funny if SWA and AT got into a bidding war with themselves,,, Gary Kelly might not think so..
I imagine that any Atlanta AT exec who decided to bid against WN for those LGA slots would rapidly find him/her self "made available to the wider job market" as we used to say.
brokenwrench
Senior
Oh well. US Airways and Delta can always take the AA "whistling in the dark" position..."We are not in the least concerned about Southwest's entry into our market in (STL/BNA/MCO/fill in the blank). Our passengers have no interest in flying on Southwest."
Monday, October 17, 2011
Big Changes At Atlanta...
And They're Not What Most People Are Expecting
One year ago, immediately after Southwest called our office to give us the details of the AirTran deal they had just announced that morning, Boyd Group International published the first (and until now, only) independent comprehensive review of the potential route fit and effects of Southwest entry at ATL.
Unlike the analyst herd that immediately started to babble about the "Southwest effect" and how ATL traffic would spike, our analyses revealed the following pertinent points:
http://www.aviationplanning.com/Images/BoydGroupSouthwestMergerReport.pdfhttp://www.aviationplanning.com/Images/BoydGroupSouthwestMergerReport.pdf
First, there would not likely be any huge slashing of fares, nor any Southwest-generated spiking of demand. What the veneer analysts in the financial world missed was that AirTran - a lower cost carrier than Southwest - had already had achieved that "effect" in 24 of the top 25 ATL O&D markets.
Second, it was pointed out that, depending on time of year, AirTran traffic at ATL was between 60% and 67% "flow" - i.e., their pattern of 180 - 190 daily departures at ATL was fundamentally dependent on connecting traffic. This absolutely requires formal "banking" of flights. If Southwest was to keep the revenue flows represented by AirTran at ATL, they could not expect to do so just with O&D traffic.- the connecting traffic would be critical to keeping anywhere near the frequencies operated by AirTran.
As noted, the major O&D markets were already fare-stimulated, and the connecting passengers carried by AirTran was the revenue support for the ATL operation.
Finally, it was found that a "lynchpin" for the AirTran ATL operation was the flow revenues from many of the smaller markets into ATL - markets that without significant connections at ATL have nowhere near the local O&D to support nonstops to Atlanta. One example: AirTran's ATL-CLT traffic is less than 10% local - yet CLT flows over 170,000 feed passengers to the AirTran system..
That Was Then. This Is The Future. One year later, the situation in regard to how Southwest will structure ATL is coming into focus. The first hard conclusion is that Southwest is fundamentally, operationally, and structurally a very different airline than AirTran. It simply cannot just take over AirTran and fit it into the WN system. It's sort of like a non-standard gauge railroad taking over a narrow gauge operation. Major changes in how AirTran captured traffic will be needed.
Southwest has announced two changes to that extent. One is that they will "unwind" the AirTran hub at ATL, and the second is that as a result, they will operate fewer flights at ATL. There is more to come.
Get The New independent Study. Boyd Group International has accomplished a complete review of what now logically can be expected at ATL, and what some markets served now by AirTran will need to start planning for. We will first be sharing this with our clients for review. It will be available to the public on Thursday, October 20.
Some key findings - ones that run counter to, and much deeper than the shallow Wall Street stock-peddlers can comprehend - are:
A Positive Industry Effect. One factor missed: overall, the Southwest acquisition of AirTran will result in a number of very positive outcomes for the airline industry as a whole - particularly in the Deep South.
Star Is Smiling Broadly. One of the prime beneficiaries of the acquisition will be the Star Alliance, which will be materially strengthened by the fallout from Southwest ATL operation. (Yes, the Star Alliance.)
Potentially Fewer Flights, Less Enplanements For ATL. The Southwest operation at ATL will likely be smaller than currently envisioned. The study reveals that the flow traffic carried now by AirTran represents the capacity equivalent of approximately 100 of the 180 daily departures that carrier operates at ATL, representing somewhere near 8 million passengers annually. Cut the connecting hub, and the majority of these consumers are gone from the future WN system.
Uncertain Revenue Results - But Likely Very Positive For WN. Southwest has estimated as much as a billion dollar spike in revenues from the ATL operation. It is noted that AirTran today does less than $600 million annually on its O&D traffic. It's also noted that much of the FL O&D will be out of reach of Southwest if they "unwind" the connecting hub and deprive these routes of the needed flow traffic to support them. But the study indicates other potential upsides - ones that may render the billion dollar estimate somewhat conservative.
The 2011 Boyd Group International WN-FL Merger Analysis will be available on this site October 20
There is a bid for LGA SLOTS BID B which was posted on 11/21 and it is $5,000,000.00 however that was at 1530 EST and the bid was open until 1700 EST. I guess the FAA went home and will post the winners on Nov 23. I would almost bet that that bid was from WN.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
The total value of the bids was about $100M.... each of the LGA bundles went for about $30M and the DCA bundle went for $40M... now to see who those bidders were.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
Here are the bids
http://www.faa.gov/about/office_org/headquarters_offices/agc/ReAllocation/LGAABids/
http://www.faa.gov/about/office_org/headquarters_offices/agc/ReAllocation/LGABBids/
http://www.faa.gov/about/office_org/headquarters_offices/agc/ReAllocation/DCABids/
http://www.faa.gov/about/office_org/headquarters_offices/agc/ReAllocation/LGAABids/
http://www.faa.gov/about/office_org/headquarters_offices/agc/ReAllocation/LGABBids/
http://www.faa.gov/about/office_org/headquarters_offices/agc/ReAllocation/DCABids/
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
looks like WN was outbid by B6 and WS.
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http://www.bloomberg.com/news/2011-11-23/laguardia-reagan-flight-slots-fetch-100-million-in-bids.html
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JetBlue Airways Corp. (JBLU) won an auction to add flights at New York’s LaGuardia airport and Reagan airport in Washington, beating rivals that included Southwest Airlines Co. (LUV), two people familiar with the matter said.
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http://www.bloomberg.com/news/2011-11-23/laguardia-reagan-flight-slots-fetch-100-million-in-bids.html
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JetBlue Airways Corp. (JBLU) won an auction to add flights at New York’s LaGuardia airport and Reagan airport in Washington, beating rivals that included Southwest Airlines Co. (LUV), two people familiar with the matter said.
DALLAS NEWS Airline blog:
Gary Kelley made the following statement concerning the DCA/LGA SLOTS:
"We bid a whole bunch of money. To put it in perspective, for eight daily departures out of Washington National we bid the equivalent of one airplane of over 30 million bucks. As you can imagine when we're not hitting our profit targets, that absolutely stretches the limit of what I was comfortable with," Kelly told employees.
"The winning bid, believe it or not, was over $40 million. That is absolute madness. It is a guaranteed money-loser," he said.
Time will tell if JetBlue paid to much for those slots.
Gary Kelley made the following statement concerning the DCA/LGA SLOTS:
"We bid a whole bunch of money. To put it in perspective, for eight daily departures out of Washington National we bid the equivalent of one airplane of over 30 million bucks. As you can imagine when we're not hitting our profit targets, that absolutely stretches the limit of what I was comfortable with," Kelly told employees.
"The winning bid, believe it or not, was over $40 million. That is absolute madness. It is a guaranteed money-loser," he said.
Time will tell if JetBlue paid to much for those slots.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
WN clearly felt they could not make money given $4-5M slot costs per flight..... that is a VERY steep price to pay.
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I have my concerns that B6 paid too much for their access... but I didn't write the check and honestly B6 might consider what they bought as a necessary "loss leader" expense in order to grow its presence in key markets.
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I don't think it will be the last time slots will be traded or sold at DCA or LGA - but this transaction probably will result in a major revaluation of the balance sheets of airlines that do fly to the slot controlled airports.
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WN might get more opportunities - but it does say that for now, WN will sit on the sidelines and will watch one of its former potential codeshare partners grow in partnership with another US carrier and yet another US carrier will gain its own opportunities to grow in key business markets.
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And WN will likely be announcing in the near future a reallocation of its DCA/LGA slots, moving many from ATL to other gateways with a much cloudier outlook for WN's potential to take on the ATL market.
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