Another Washington National Airport Slot Pair, Another Airline Battle

With a highly valued slot pair available, four airlines are hungry for growth.

Apr 2, 2014 at 10:30AM

Industry followers know well that slots at Washington National Airport are highly valued. With a centralized location adjacent to Washington, D.C., and a tightly held supply of slots, the ability to takeoff and land aircraft there is a strong boost to operations and competitiveness. The Dallas News reports that another slot pair is available at this coveted airport, so it's time to have a look at the competing airlines.

Return of the airline
American Airlines Group
(NASDAQ:AAL) is one contender for the Washington National slot, and proposes using Bombardier CRJ200 jets to connect the airport with Islip, N.Y., on Long Island. Since this type of aircraft only holds around 50 seats, it's the smallest proposed aircraft for the slot.

The push from American comes with another key issue: The Department of Justice, or DOJ, challenge to the merger between US Airways and American Airlines was settled with terms that included the merged airline giving up 52 slot pairs at the airport. These terms were written over concerns that American Airlines Group would have too great a presence at Washington National.

The airline consistently disagreed with the DOJ, and argued that forcing slot concessions would reduce flights to small communities. (The airline makes a similar small-community argument for why it should get this slot pair as well.) In the end, the airline agreed to the terms because it wanted to get the merger done and looks to be trying as hard as it can to build operations at the airport.

The other major carrier
Although relying on a different operating style than the legacy carriers, Southwest Airlines (NYSE:LUV) is still a major airline. Even as the king of U.S. discount airlines, Southwest is still in search of expansion opportunities.

Washington National has been seen as a great opportunity for Southwest to enter a tightly held market and add more impressive airport real estate to its network. Because of this, Southwest has been aggressive in acquiring slots at this airport by both encouraging slot concessions in the merger lawsuit settlement and by acquiring 28 slot pairs from the forfeited slots.

Southwest plans to use 143-seat Boeing 737-700 aircraft to service Kansas City, Mo., and says that without this service "Kansas City would be the most under-served medium or large market within the DCA perimeter."

Southwest has even set up an online petition so people in the Kansas City area can support Southwest's service to and from Washington National.

Northeast favorite
(NASDAQ:JBLU) has also been a winner from American Airlines Group's slot divestments. JetBlue was able to get 12 new slot pairs and ownership over eight other slot pairs being leased from American Airlines.

But JetBlue wants an even greater presence at the airport. With slots at many prime airports tightly held, it can be difficult for smaller airlines like JetBlue to grow their networks. If it does win the slot pair, the airline plans to offer flights on a 100 seat Embraer E190 to Jacksonville, Fla.

Start-up carrier
People Express Airlines also wants to make a name for itself in a market dominated by major carriers. As part of its plan, People Express wants to operate a flight to Palm Beach, Fla., from October to April, and a flight to Myrtle Beach, S.C., from April to October, with both flights using a 150-seat Boeing 737-400.

Who will win?
At this point, this slot pair could go to any of the four airlines on this list, and with the deadline for applications closed these appear to be the finalists. All four airlines make reasonable arguments for getting the slot pair -- however, American Airlines could face an uphill battle in this situation.

One of the major points of the DOJ merger settlement was that it required the divestment of 52 Washington National slot pairs. By giving a slot to American Airlines Group, the Department of Transportation would be effectively undoing part of the DOJ settlement. It could still happen, but both the odds and political winds are against it.

Slots for sale
Being able to fly into a major airport is not as easy as simply landing and taking off. Major airlines know this, and are pulling out all the stops to get the slots necessary to operate these flights. In the near future, we should get a decision on this Washington National slot pair and which carrier will get a slightly larger presence at this in-demand airport.

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Alexander MacLennan owns shares of AMERICAN AIRLINES GROUP INC. and has the following options: long January 2015 $17 calls on AMERICAN AIRLINES GROUP INC, long May 2014 $31 calls on AMERICAN AIRLINES GROUP INC, long January 2015 $32 calls on AMERICAN AIRLINES GROUP INC, long January 2015 $40 calls on AMERICAN AIRLINES GROUP INC, and long May 2014 $40 calls on AMERICAN AIRLINES GROUP INC. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. 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.

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