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What's Virgin America Planning for LaGuardia Airport?

Adam Levine-Weinberg
December 9, 2013

Upstart carrier Virgin America is on the verge of buying six slot pairs at LaGuardia Airport from American Airlines, according to multiple media reports. However, flight restrictions at LaGuardia will prevent Virgin America from flying to either of its hubs (San Francisco and Los Angeles). So why is Virgin interested?

Why does Virgin America want slots at LaGuardia Airport? (Photo: Virgin America)

The most likely explanation is that slots at the New York area airports are hard to come by, so Virgin America will take whatever it can get. Virgin America targets business travelers and tech-savvy individuals, a clientele that cares about access to big cities like New York. It may therefore use the LaGuardia slots to offer connecting service to the West Coast through Chicago or other cities it already serves.

Strange move?
Southwest Airlines
(NYSE: LUV) has announced that it is acquiring most of the LaGuardia Airport slots being sold off as part of the American-US Airways merger. For Southwest, the move makes perfect sense. It already holds 27 slots at LaGuardia Airport, from which it flies to a number of important business and leisure markets in the Midwest and South. With extra slots, it can provide more flights to cities where it already has a strong presence.

By contrast, nearly all of Virgin America's flights today touch either San Francisco or Los Angeles, two cities that it cannot serve directly from LaGuardia (except on Saturdays).

Given that the company has pledged not to grow much for the next year and a half, it seems unlikely that Virgin America will look to set up a third major operational base in the eastern U.S. On the other hand, it would be hard for Virgin America to successfully compete on a point-to-point route where it has negligible market share on either end.

Fighting for position
Instead, a more likely outcome is that Virgin America will use the LaGuardia slots to broaden its offerings for people traveling between the West Coast and New York. Indeed, the company has long expressed an interest in expanding its West Coast-New York flight options.

Virgin America's nonstop flights from San Francisco and Los Angeles to JFK Airport were two of its earliest routes. Recently, the airline has been vocal about the difficulty of getting better access to New York. After five years of trying, Virgin America finally secured six slot pairs at Newark Airport, a fortress hub for United Continental (NYSE: UAL).

This allowed it to begin service from San Francisco and Los Angeles to complement the existing JFK routes. Despite a fare war instigated by United, Virgin America's Newark routes quickly became profitable.

While the LaGuardia slots cannot be used for nonstop service to the West Coast, Virgin America could use them to offer one stop same-plane service from San Francisco and Los Angeles to LaGuardia. Chicago's O'Hare International Airport would be th