Should the U.S. Department of Justice rule in favor of the
American Airlines-US Airways merger, as is expected by the end of September,
many analysts and industry-watchers suspect the department's conditions would
include slot divestitures at Ronald Reagan Washington National Airport.
US Airways CEO Doug Parker, leader-to-be of the merged airline,
pushed back at the premise during an annual shareholder meeting Friday, during
which US Airways stockholders went through the motions of officially
approving the transaction.
Parker acknowledged that American and US Airways combined
would hold "something in the order of two-thirds" of the departure
slots at Washington Reagan, which "is being used as the rationale to say,
'That's too many, and they should divest.' "
Not only is there no legal antitrust threshold at which an
airline must relinquish slots, Parker said, but also similar and even greater airport
share positions aren't uncommon among competitors.
The approvals of the mergers of Delta and Northwest, United
and Continental and Southwest and AirTran fortified strong hub positions,
Parker argued. He rattled off the figures: Delta holds 78 percent slot share at
Atlanta, 83 percent at Detroit, 76 percent at Minneapolis and 77 percent at
Salt Lake, while United has 74 percent at Newark, 75 percent at Washington Dulles
and 86 percent at Houston Intercontinental. Southwest, meanwhile, holds 83
percent share at Chicago Midway.
Furthermore, Parker said the number of departures
"isn't even a relevant number" to gauge competitive presence. Look instead
at the number of seats, he said. "Because we fly to so many small
communities out of Reagan," routes on which the carrier uses smaller
aircraft, the combined carrier's seat share at Reagan "is closer to 50
percent, much lower than these other airlines have at their hubs."
Additionally, Parker said the Washington, D.C., area boasts competition
from three airports. Including Dulles and Baltimore
Washington International Airport, the merged American would hold
about a quarter of Washington-area seats, "lower than United's share in
the D.C. area and about exactly the same as Southwest," Parker said.
JP Morgan airline analyst Jamie Baker pointed to mounting
pressure for US Airways and American to divest at DCA. "Most recently, it was reported that attorneys general from 19
states have joined the [DOJ] probe, and that concentration at DCA may need to be
addressed," he wrote in a July 3 research note.
A recent U.S. Government Accountability
Office report, entitled "Issues Raised by the Proposed Merger of American
Airlines and US Airways," noted that U.S. Department of Transportation
policy and "congressional action" in recent years have "favored new-entrant
airlines like Southwest" in awarding operating rights at "congested
airports like Washington Reagan and New York LaGuardia."
That was the case in 2010 when the DOJ approved the United-Continental
merger with conditions that called for the combined carrier to relinquish Newark slots to Southwest.
In this latest merger scenario, JetBlue already has positioned itself
for control of slots that may become available at Washington Reagan, according to
media reports.
"We've long expected DCA to draw
scrutiny given [US Airways'] formidable, post-Delta-slot-swap market share,"
said Baker, referring to a 2011 transaction that boosted US Airways'
seat share at Washington Reagan. That deal also required slot divestitures.
Parker on Friday suggested that forcing
American and US Airways to divest slots at Washington Reagan would result in
reduced service to smaller communities. Baker seemed to agree with that
premise: "Admittedly, forcing [the merged American] to surrender slots
currently utilized to serve smaller cities so that JetBlue could fly to Orlando
strikes us as a curious and regrettable allocation of public resources."