DOT approves four more beyond-perimeter routes to DCA – Alaska, Southwest, Virgin America and JetBlue get the nod

by: Siva Vayali - May 14th, 2012   Filed under: Airlines, Airports 1 Comment

The US Department of Transportation today selected four more beyond-perimeter routes to Washington’s Ronald Reagan National Airport (DCA). US DOT selected applications from Alaska Airlines (AS) to serve Portland, OR (PDX); Southwest Airlines (WN) to serve Austin (AUS); Virgin America (VX) to serve San Francisco (SFO) and JetBlue (B6) to serve San Juan, PR (SJU).

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The FAA Reauthorization Bill allows eight slot pairs for beyond-perimeter destinations. The network carriers (United, Delta, American and US Airways) were allowed to convert one of their slot-pairs to operate a beyond-perimeter destination. Four new slot-pairs were awarded to carriers that have minimal service at the airport. Alaska is the biggest beneficiary. It already serves to Seattle and Los Angeles from DCA. With Portland, OR added to its kitty, it would operate daily services from Reagan to three of the top five West Coast cities.

I think, Southwest is playing it safe by selecting Austin. It could have applied for Denver, Las Vegas or Phoenix, but the chances of getting approval from DOT are remote.

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US Airways announces flights to Jackson, MS from Reagan but no details yet on the route for its long distance slot

by: Siva Vayali - March 5th, 2012   Filed under: Airlines, Airports Add Comment

I received few emails from our readers about announcement from US Airways about nonstop flights from Washington Ronald Reagan National Airport to Jackson, MS (JAN). I think they are under the impression that US Airways is utilizing the long distance slot to start service to Jackson. This is not correct. US Airways has not yet announced its plan for the usage of one slot pair permitted by DOT under the FAA Reauthorization Bill to start service to a destination exempted by the perimeter rule. The Jackson flight will be operated using the slots it gained by the slot-swap deal with Delta. I confirmed this with the US Airways Corporate Communications department.

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Under the FAA Reauthorization Bill, the four network careers (United, Delta, American and US) got exemptions to operate one round trip service to a destination beyond the 1250 statute miles limited by the perimeter rule. The careers did not get new slot pairs, but have to use one of their existing slot pairs to start this service. United, American and Delta already announced their routes for these exemptions.

Considering the fact that US Airways is the dominant career at Reagan National, it would take time to carefully evaluate its route options for the long distance slot. From Reagan National, it already operates three daily flights to Phoenix(PHX) and a one daily to Las Vegas (LAS). It would be very interesting to see how it would use the slot.

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More long distance flights to Washington Reagan National – American to LAX and Delta to SLC

by: Siva Vayali - February 29th, 2012   Filed under: Airlines, Airports 5 Comments

The effects of the recently passed Federal Aviation Administration Reauthorization bill are already showing some positive signs for Washington’s Ronald Reagan National Airport (DCA). American and Delta announced new flights to the airport.

American Airlines yesterday announced a daily flight between Reagan National and Los Angeles International Airport (LAX) staring June 14, 2012. The flights will be operated by a 757 configured in two classes with 22 seats in First and 166 seats in Main Cabin. The route is already served by another daily non-stop from Alaska Airlines. The Los Angeles to Washington region flights are dominated by United Airlines with up to eight daily frequencies to between its hubs in LAX and Dulles and a daily flight between LAX and BWI. It has no flights between LAX and Reagan National. American operates up to three daily flights between LAX and Dulles. It would be interesting to see how United would respond to American’s new flight between LAX and Reagan National.

Starting June 7, 2012, Delta will be adding a second daily frequency between Reagan National and Salt Lake City (SLC). Though I haven’t seen a press release yet from Delta on this, I confirmed the news from its corporate communications office. This shows strong demand for the DCA-SLC route and Delta’s desire to lock in its status as the preferred airline between Salt Lake City and the National Capital Region. Delta already operates services from its Salt Lake City hub to all three airports in the Washington Baltimore Metro area: once daily to both Dulles and Reagan National and twice daily BWI. United operates a single daily frequency between Dulles and Salt Lake City. So does Southwest between BWI and Salt Lake City. With the addition of the second flight to SLC from Reagan National, Delta will reinforce its share between these sectors.

Reagan National Airport’s traffic is mostly O&D. The slots to the close-in, capacity constrained airport are strictly controlled by FAA and command a premium. The airport has set a passenger record for 2011 and this year will be another breakout year for many reasons: the recent slot-swap deal between Delta and US Airways would allow the latter to increase the service at the airport starting March 25; JetBlue announced additional frequencies to Boston Logan (BOS), Fort Lauderdale (FLL), Orlando (MCO) and new service to Tampa (TPA); the FAA reauthorization bill would eight new long distance flights.

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Delta and US Airways get preliminary approval to LaGuardia – Reagan National Slot Swap

by: Siva Vayali - July 22nd, 2011   Filed under: Airlines, Airports 2 Comments

The US Department of Transportation on July 21, 2011 gave a preliminary approval to the slot swap proposal submitted by Delta Air Lines and US Airways for New York’s LaGuardia Airport (LGA) and Washington’s Reagan National Airport (DCA).

As expected, DOT approved the proposal with minor changes.

One condition is to divest the slots in a blind sale to airlines that currently have little or no service at these airports. Note the term blind sale. The proposal from the airlines did not mention blind sale, so it is not clear whether this is an additional condition. Originally Delta and US Airways preferred the slots to be divested to airlines of their choice, but Southwest objected it by requesting DOT to divest these slots in an open auction. But, I think,  this should not  be  a  problem because the number of  slots  to be divested by  Delta  and US are minimal (eight slot pairs at Reagan National and 16 slot pairs at LaGuardia) compared to what they gain if  the  proposal is  approved (US Airways would gain 42 slot pairs at Reagan National in exchange  for swapping 132 slot pairs at LaGuardia with Delta).

The other condition for Delta and US Airways is to wait for 90 days before starting their new operations using this slot pairs so that the new services by other airlines can establish in these airports. This too, should not be a problem.

Both Delta and US Airways seem to be happy with these conditions.

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Happy Birthday Reagan National Airport

by: Siva Vayali - June 16th, 2011   Filed under: Airlines, Airports Add Comment

Today, the Ronald Reagan Washington National Airport celebrates its 70th anniversary. Even though the official name is long, it is popularly known as Reagan National across the country and simply National in the metro Washington/Baltimore area.

According to the Metropolitan Washington Airport Authority, the airport’s site was selected by President Franklin Roosevelt and the airport opened on June 16, 1941. In its first year of operation, the airport served 344, 000 passengers. Today, the airport serves more than 18 million passengers in a year.

Reagan National has a bright future. It nicely complements the other two airports in the area: Dulles and BWI. It is the closest airport to downtown Washington, which means, a higher proportion of its passengers are business travelers. It is still one of the few slot-controlled airports, with FAA strictly limiting the number of take-offs and landings. Airlines vie for slots to Reagan National. The airport is directly served by the Metro making it convenient for travelers. Even though the air field has virtually no space for expansion (as it sits right on the banks of Potomac River), the terminal facilities are good (especially with the renovation of historic terminal A).

There are some challenges as well. The popular shuttle service from Reagan National to New York and Boston now faces stiff competition from Amtrak’s Acela service. Even though US Airways (to LGA and BOS) and Delta (to LGA) continue to provide a near hourly service, they have reduced the plane sizes and downgraded some equipment. The airport still has the Perimeter Rule with most flights restricted to destinations within 1250 statute miles. Only a handful of long distance flights are offered to cities West of Rocky Mountains. The local population and business/political leaders oppose any increase in long distance flights to the airport.

Security is another major concern because of its close proximity to the White House and Pentagon (remember when the airport was closed for many days after the September 11 terrorist attacks?).

But overall, the airport has a very bright future.

Happy Birthday!!!

An Offbeat Note: As a local resident of Washington, DC area, my personal favorite about Reagan National is the plane spotting from Gravelly Point, especially the “River Visual” approach (one of the most challenging landing assignments for even seasoned pilots). Watching planes taking off and landing just few feet over our heads is an amazing experience!

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Delta and US Airways announce new slot swap agreement – is it really new?

by: Siva Vayali - May 24th, 2011   Filed under: Airlines, Airports 2 Comments

Delta Air Lines and US Airways yesterday announced a new agreement to swap each others slots in New York’s LaGuardia airport and Washington’s Ronald Reagan National airport. This is the third try between the two airlines to strengthen operations in their respective dominant airport – Delta in LaGuardia and US in Reagan National. May be the third time is the charm?

Why LaGuardia and Reagan National are important?

LaGuardia is the closest airport to Manhattan. Reagan National is the closest airport to downtown Washington. So, business and O&D traffic prefer these airports. The two airports have a lot in common:

  • Slot controlled, meaning the number of take-offs and landings are restricted by FAA.
  • Most preferred airport of choice in their markets.
  • Have perimeter rule that restricts long distance flights with few exceptions.
  • Traffic is mostly O&D with a huge proportion of high paying business travelers
  • Virtually no room for expansion and hence making their slots the most sought after commodity in the airline industry.

Why Delta and US Airways keep on trying for the slot swap?

Delta wants to wrest the title of New York’s biggest airline from the new United (which dominates the nearby Newark). Delta is already a dominant player in JFK, where its routes are mostly international with most of the domestic flights timed for feeding these flights. By becoming the leading airline at LaGuardia, it wants to capture the business travel market. Delta’s vision is to gain market share in New York air travel market by dominating both JFK and LaGuardia.

US Airways, though has the highest number of slots at LaGuardia, flies mostly to smaller communities with fuel guzzling turboprops. The exceptions being the mainline flights to its hubs in Charlotte and Philadelphia and the Shuttle service to Reagan National and Boston Logan. US Airways has no incentive in joining the turf battle waged between the big three in New York (United, Delta and American). Instead, it can gain market share in another important business travel airport – Washington Reagan National, where it is already a dominant player. This will perfectly fit in its strategy of focusing on its hubs in Charlotte, Philadelphia and Phoenix and the focus city in Washington.

Agreement Details

Here are the highlights:

  • Delta would acquire 132 slot pairs at LaGuardia from US Airways
  • US Airways would acquire from Delta 42 slot pairs at Reagan National
  • US Airways would acquire from Delta the rights to operate additional daily service to Sao Paulo, Brazil in 2015
  • Delta would pay US Airways $66.5 million in cash.
  • The transaction could result in the divestiture of up to 16 slot pairs at LaGuardia and eight slot pairs at Reagan National to airlines with limited or no service at those airports.

Operational Details

  • At LaGuardia, Delta will take control of Terminal C in addition to Terminal D. It will build a connector to connect the two terminals.
  • Delta will continue to operate its hourly Delta Shuttle from its six gates at the Marine Air Terminal.
  • US Airways’ hourly Shuttle service between LaGuardia, Reagan National and Boston will remain unchanged. US Airways will continue to offer its customers high-frequency schedules from LaGuardia to its Charlotte, N.C. and Philadelphia hubs and Pittsburgh with more than 60 daily weekday flights.
  • All US Airways flights from LaGuardia will continue to arrive and depart from nine gates and parking positions in Terminal C
  • US Airways plans to add at least 15 new destinations from Washington.
  • US Airways will operate approximately 230 peak-day departures at Reagan National, a 20 percent increase over current service levels.
  • The airline anticipates an increase of approximately 20 to 25 percent in passenger enplanements at Reagan National as a result of the new flights and schedule improvements.
  • There will be no increase in congestion at Reagan National due to US Airways’ planned increase in scale and Delta’s reduction in slots.

What are the chances for approval of this agreement?

Even though both airlines prefer to call it a new agreement, it is essentially a tweak of the previous two agreements – both denied by the US Department of Transportation. This time though, they may have a better chance of getting it approved.

The airline industry has changed a lot since the last agreement. In addition to the merger of United and Continental to create a new behemoth, Southwest, through its acquisition of AirTran, has gained access to both Reagan National and LaGuardia. Jet Blue has entered into Reagan National (through the slots it acquired from American).

But some of the original reservations of the US DOT remain: Delta will control more than 50% share in LaGuardia and US Airways will control close to 50% in Reagan National. The low fare competition will still be limited because of the paucity of new slots. The agreement does not specify which airlines would acquire the divested slots. Delta and US have interests in keeping Southwest from gaining these slots (Southwest argued with DOT to do a open auction for the divested slots last time). Despite these reservations, the agreement now has a better chance of getting approved.

Let’s wait and see!!!

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Virgin Atlantic at the Crossroads: Good Opportunity for Delta and the SkyTeam?

by: Siva Vayali - February 25th, 2011   Filed under: Airlines 2 Comments

Virgin Atlantic Airways is in a peculiar situation. The airline, promoted by Sir Richard Branson, does not belong to one of the three major alliances (Star, OneWorld, Sky Team). The airline’s viability is now threatened by the industry consolidation, the Open Skies agreement between the European Union and the United States and Anti Trust Immunity (ATI) granted to the airline alliances for the transatlantic services. The ATI for OneWorld partners British Airways, Iberia and American Airlines especially threatens Virgin’s long term ability to compete in the important UK-US aviation market.

Virgin Atlantic A340-600: Courtesy - Virgin Atlantic Airways

Virgin Atlantic A340-600: Courtesy - Virgin Atlantic Airways

Virgin Atlantic has been a long time opponent of any alliance between AA and BA (no wonder its tagline was “No Way BA/AA”). Rumors have been that Virgin is finally evaluating its options and the SkyTeam is trying to come up with a bid to acquire Virgin.

Virgin Atlantic’s strengths

Virgin Atlantic’s important strength is its slots at London’s Heathrow Airport (LHR).  LHR is the biggest international airport in the world and London is the most important transatlantic business market along with New York. Virgin is an important player in that market.

Virgin Atlantic has an excellent product which is consistently ranked as one of the best in the world, well above that of the mainline European and North American airlines. Only carriers like Singapore Airlines and Emirates can challenge Virgin’s product. Virgin’s lounges and airport clubs have been top notch and it has a stellar brand loyalty.

Virgin through its subsidiaries Virgin Blue and V Australia, has a decent footprint in Australia.

Virgin Atlantic’s weaknesses

Virgin’s route network is mostly long haul, point-to-point. Passenger traffic is mostly to O&D. It was setup that way by the management. In this world of alliances and frequent flyer loyalties, it is difficult for Virgin to develop new markets.

Virgin has no flights within the UK except at London (LHR and Gatwick), Manchester and Glasgow. Virgin has no flights to the rest of the Europe as well. This makes Virgin a niche player, making it difficult to expand its market share.

Virgin’s fleet primarily consists of B747s and A340s. Most competitors utilize more efficient B777s and A330s (which are slowly showing up in Virgin’s fleet now). This means Virgin’s operating cost will be higher than its competitors.

Sir Richard has his footprint all over the airline. Even though this is a good thing in general, the industry may view it the other way. He might not be open for outright acquisition and liquidation of Virgin brand.

Opportunity for Delta and SkyTeam

Rumors are on the rounds that Delta, along with its SkyTeam partners Air France-KLM, is preparing a bid to acquire Virgin. This is a great opportunity for Delta and SkyTeam. They can acquire the 49% stake currently held by Singapore Airlines. There are immediate benefits.

Delta and SkyTeam resolve their biggest missing link – a strong foothold in London and UK in general.

Delta gains the new additional slots at LHR. This greatly enhances its ability to serve the busiest transatlantic market: London – New York. Combining Delta’s and Virgin’s flights would give the BA/AA combo a better competition (still BA/AA would be the strongest player in this market for the foreseeable future). It will move Delta to the second place in this market ahead of Continental. Delta will have flights to the top five US-UK air travel markets: New York, Chicago, Los Angeles, Washington, San Francisco. Except New York, Delta does not operate in any of these markets. Combine this with Delta’s growing London – Boston and London – Miami routes, and its dominance at Atlanta and Detroit, the SkyTeam becomes the second biggest players in the US-UK market ahead of Star.

Delta gains a mini hub at San Francisco, thanks to the growing Virgin America operations.

Delta’s fledgling transpacific operation could get a boost from a partnership with V Australia and Virgin Blue.

Upside for Virgin too

Virgin Atlantic has some upsides as well.

It can retain the Virgin brand and its unique product.

Joining the SkyTeam means, it has better chances to gain the connecting traffic in US. Virgin can start services to Atlanta and Detroit using its own metal, paving the way for its UK passengers to connect through these fortress hubs operated by Delta.

Better Pan European connectivity through  Air France and KLM.

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Reagan National Airport And Long Distance Flights

by: Siva Vayali - February 9th, 2011   Filed under: Airlines, Airports 3 Comments

The FAA Re-Authorization bill is stuck in the United States Senate because of a battle over allowing more long distance flights to Ronald Reagan Washington National Airport (commonly called just National Airport in the Washington/Baltimore metro area).

Ronald Reagan Washington National Airport - Courtesy: Metropolitan Washington Airports Authority

What is the Perimeter Rule?

Reagan National Airport has a Perimeter Rule that prevents flights longer than 1250 miles. It is also a slot-controlled airport, which means the number of take-offs and landings are strictly controlled by the FAA. Any increase to the number slots has to be approved by the FAA/DOT. This means the slots are one of the most valuable commodities. Airlines scramble to get slots at Reagan National. The traffic is mostly business travelers and O&D.

Why Perimeter Rule was put in place first?

  1. The initial objective of the Perimeter Rule was to drive traffic to the newly built, once thought as a white-elephant, distant Dulles International Airport.
  2. With the advent of Jet age, the rule was cited as a preventive measure to control noise around the densely populated Northern Virginia suburbs of Arlington and Alexandria.
  3. With the terrorist attacks on September 2001, the security angle also came into play, because of the airport’s proximity to downtown Washington and Pentagon.

Why the Rule is still in place?

The real reasons for not relaxing the rules are the following:

  1. The local population living around the area vehemently opposes any relaxation of these rules fearing increased air and noise pollution. This means the local politicians have no incentive to support this measure.
  2. Both Reagan National and Dulles are run by the same agency – Metropolitan Washington Airports Authority, which sees no big reason to change the status quo.
  3. The local population is used to drive to Dulles, as it is the main international gateway to the region. People on the Maryland side of the beltway have easy access to Baltimore Washington Thurgood Marshal Airport (commonly referred here as BWI). BWI offers excellent low fare choices as it is the hub for Southwest Airlines.
  4. All the three airports thrive because of their unique advantages (National – preferred by the business traveler, mostly O&D traffic; Dulles – primary international gateway with wealthy population living around; BWI – excellent low fare choices).
  5. And finally, the local law makers and airport administrators have some concern of loosing traffic to Reagan National if more flights and destinations are added (which is not true as I explain it later).

These reasons make sense as it is a local transportation issue and hence the local people and leaders should make decision.

Why Perimeter Rule is a problem?

  1. The restrictions are against the free competitive market spirit of America.
  2. Also, the Western US markets such as California, Oregon, Washington, Arizona, Colorado and Utah want direct non-stop access to Reagan National Airport. Their argument cannot be dismissed either – they want to have access to the closest airport to downtown Washington.

What is the problem in adding more services to Western markets?

  1. The issue gets complicated as there are no free slots available to add more flights.
  2. Adding new slots will be opposed by the local population living around the airport.
  3. Exiting slots cannot be used to start services to these new markets because of the fear that the smaller markets in the Midwest will loose their existing service. The law makers and business leaders in Midwest would not agree to that.

So, what should the Congress do?

Should it repeal the Perimeter Rule? No.

Should it keep the rule as is? No.

Congress should strike a compromise.

  1. Allow very limited number of new slots to Reagan National in order to serve San Francisco, San Jose, San Deigo and Portland, OR markets of the Western states. These markets lack non-stop service to Reagan National airport.
  2. These slots should not be used for expanding existing services to markets such as Los Angeles, Las Vegas, Phoenix, Denver and Salt Lake City, because they already have non-stop services to Reagan National.

What are the implications of adding few new slots?

Local Population Living Around National Airport – With modern jetliners, the noise and air pollution is much less than what we think. So, this should not affect their quality of life.

Markets that already have services to National Airport – New slots are used for these services and hence it should not be a problem.

Dulles Airport – There are some concerns with the local law makers and airport administrators that Dulles might loose some traffic. But, the impact on Dulles would be minimal. Dulles thrives and it is the largest airport in the region. It serves two of the wealthiest counties in country (Loudoun and Fairfax). It also serves the economic engine of Northern Virginia, namely the Tysons Corner and Dulles Technology corridor. With United operating its transatlantic hub, there should be plenty of connecting traffic in addition to the O&D.

BWI Airport – BWI would do fine too, as it caters to the Baltimore market in addition to the Washington market. It also has the low fare juggernaut in Southwest.

US Airways – Ideally US Airways would prefer to use its existing slots because new slots would be very difficult to justify as it is the dominant carrier at National. But, it could argue with DOT that as a dominant carrier, it should get some new slots so that it can offer connections to West Coast for smaller Eastern communities through National. I am not sure how this argument will fly with DOT. So, if new slots are allowed, it would mostly be negative to US Airways as other airlines would compete to get them. If few of the existing slots are allowed to start these services, US Airways would be the major beneficiary.

United Airlines – United also has something to gain and loose in this arrangement. As a dominant airline at Dulles, it might loose some business traffic to National Airport because San Francisco is one of the top destinations in Washington/Baltimore area. On the same token, as a dominant airline in SFO, United could win new slots to serve SFO from National (Virgin America would compete to get these slots too).

Other Airlines – If Portland, OR is allowed to have direct service, Alaska airline may benefit.

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