Southwest Airlines intends to make its first foray into New York City by buying 14 slots at LaGuardia Airport, the carrier announced today, through a $7.5 million acquisition of bankrupt ATA Airlines, a transaction that must be approved by the U.S. Bankruptcy Court in Indianapolis.
If approved, Southwest said it would work with the U.S. Federal Aviation Administration and the Port Authority of New York & New Jersey, which operates LaGuardia, to acquire the gates and facilities necessary for Southwest to begin operating its first flights at one of the three major New York metropolitan-area airports, including John F. Kennedy International and Newark Liberty International. No details on when, and to where, service would begin have been determined, Southwest said.
"Even in this volatile environment, we have said we must monitor the competitive landscape and take advantage of prudent market opportunities," said Southwest chairman, president and CEO Gary Kelly in a statement.
Throughout its history, Southwest has focused operations in secondary airports in or near major cities, in many cases avoiding other major hub airports. Southwest's service to the New York area, for example, is provided to Long Island MacArthur Airport, from where it operates nonstop flights to Chicago, Las Vegas, Baltimore/Washington International and five airports in Florida.
The proposed transaction of ATA is intended to acquire the LGA slots, Southwest said, and "does not contemplate operating ATA." Southwest would not "acquire, as a part of its bid, any aircraft, facilities, or employees of ATA," it said. ATA filed for bankruptcy and discontinued flights in April
(BTNonline, April 3).
"It will adjust the pricing in that market," said Dominion director of travel and corporate services and
BTN's2007 Travel Manager of the Year Donna Kelliher, pointing to Southwest's 2004 entry into Philadelphia International Airport
(BTNonline, Nov. 10, 2003). "Look at how it adjusted the pricing in that market. This is what I want to see. A little competition goes a long way."
Robert Mann, president of airline consultancy R.W. Mann & Co., said, "It seems to me that it's bigger than just LaGuardia, since they also would acquire the operating certificate from ATA." Mann noted that a deal could also give Southwest Airlines Extended Operations authority, known to the industry as ETOPS. "ATA had it with the 757. That in theory gives Southwest, should they chose to develop the ability, to fly U.S. to, let's say, even Europe, but certainly the Caribbean and Hawaii, or other places where ETOPS might be valid."
Mann said Southwest's acquisition of the slots and other ATA assets through the bankruptcy process largely is procedural, "but it's about money," he said. "If a higher bidder emerges then you could see a contest develop here."
Private equity firm MatlinPatterson holds ATA's assets through its debtor-in-possession financing through the carrier's bankruptcy. Though the firm holds other aviation assets and could view ATA's assets as strategic to that portfolio, Mann said time is of the essence since the LaGuardia slots fall under a use-it-or-lose-it principle. "It would surprise me if they just let it go," Mann said.