Is Your City Losing Direct Flights to D.C.?

American Airlines just announced cutbacks at Ronald Reagan Washington National Airport, and some cities may lose their only direct flights to the nation's capital.

Jan 16, 2014 at 1:00PM

American Airlines (NASDAQ:AAL) on Wednesday announced its long-threatened cutbacks at Ronald Reagan Washington National Airport. The airline is being forced to end some flights at the congested airport just outside the nation's capital as part of its merger with US Airways, in order to make room for low-cost carriers. As a result, American will end nonstop service to 17 cities from Reagan Airport.

New American Livery

American is giving up slots at Ronald Reagan Washington National Airport to appease antitrust regulators. Photo: American Airlines.

The impact of these flight cuts will vary significantly from city to city. The airports losing service can be divided into three camps. First, there are several airports that will continue to have nonstop service to Reagan Airport through another carrier. Second, there are a handful of airports that have flights to one or both of the other Washington D.C.-area airports on other airlines. Third, some airports will lose their only service to Washington, D.C. Those cities are the real losers here.

Losing service
Federal regulators are requiring American and US Airways to give up 52 slot pairs at the airport as a condition of their merger. This will necessitate dropping 44 round-trip flights (the other eight slot pairs are already leased to JetBlue Airways (NASDAQ: JBLU)).

The 17 cities losing flights are: Augusta, Ga.; Detroit; Fayetteville, N.C.; Fort Walton Beach, Fla.; Islip, N.Y.; Jacksonville, N.C.; Little Rock, Minneapolis, Montreal, Myrtle Beach, S.C.; Nassau, Bahamas; Omaha; Pensacola, Fla.; San Diego; Savannah, Ga.; Tallahassee; and Wilmington, N.C.

Category one: the lucky ones
A few cities will still have nonstop service to Reagan Airport. They are merely losing some competition. Detroit and Minneapolis are both Delta Air Lines (NYSE:DAL) hubs and will continue to have ample service on Delta. The airline is also starting a nonstop flight between Omaha and Reagan Airport next month. Lastly, Air Canada flies between Reagan Airport and Montreal.

Delta and Air Canada will now have monopolies on these four routes, which could drive prices up. However, with the exception of Omaha, all of these cities also have direct service on other airlines from Washington Dulles International Airport and/or Baltimore-Washington International Thurgood Marshall Airport. This indirect competition should help limit price increases.

Category two: the ones in between
While most of the cities American is dropping will not retain service to Reagan Airport, many have direct flights to Dulles Airport or BWI. In this context, it's helpful that United Continental (NYSE:UAL) operates a hub at Dulles and Southwest Airlines (NYSE:LUV) operates one of its largest focus cities at BWI.


United Continental operates the other major airline hub in the D.C. region at Dulles International Airport.

Among the cities losing nonstop service to Reagan Airport, United flies from its Dulles hub to Fayetteville, San Diego, and Savannah. Meanwhile, Southwest and its AirTran subsidiary fly from BWI to Little Rock, Islip, Nassau, and San Diego. Lastly, Spirit Airlines (NASDAQ: SAVE) offers seasonal service from BWI to Myrtle Beach between late April and early November.

Category three: the real losers
This leaves six airports that are actually losing their only service to the nation's capital: Augusta, Fort Walton Beach, Jacksonville, Pensacola, Tallahassee, and Wilmington. Residents of these cities will either need to connect at a nearby hub or drive one to two hours (or more in some cases) to the nearest airport that will still have nonstop service to Washington, D.C.

It's very unlikely that the airlines that buy American's slots at Reagan Airport will maintain service to small cities. It simply doesn't make financial sense to spend millions of dollars to buy a slot and then use it for a low-traffic route.

However, there's still some hope for these communities. United Airlines operates the only other true hub in the D.C. area, and it may view American's downsizing as an opportunity to expand. United already serves plenty of small and medium-sized cities from Dulles Airport, and it could probably generate enough connecting traffic to profitably serve some or all of the cities that American is dropping.

Foolish takeaway
American Airlines (and former US Airways) executives stubbornly resisted the idea of giving up slots at Reagan Airport. They even went to Congress to tell lawmakers that many small cities would lose their service to Washington, D.C. if antitrust regulators required the merged carrier to divest slots.

The reality is not quite so stark. American Airlines is dropping service to 17 cities from Reagan Airport later this year, but only six of those cities are actually losing their sole direct service to Washington, D.C. Even those cities could potentially be "rescued" by new service on United to its Dulles hub. Meanwhile, fliers in the D.C. area are likely to see lower airfares to popular destinations as low-cost carriers build up service at Reagan Airport.

Get up to speed on the new energy boom
Airlines have been bedeviled by high oil prices for the past decade. Yet that could soon be a distant memory, due to a domestic oil and gas boom that's helping some investors get rich. The Motley Fool's special free report, "3 Stocks for the American Energy Bonanza," will get you up to speed on this giant opportunity. Click here to access your copy -- it's absolutely free!

Adam Levine-Weinberg is short shares of United Continental Holdings. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information