Ding Dong, the deal ain't dead...


Southwest Is the Sweetheart of United-Continental Deal


One of the biggest beneficiaries of the United-Continental merger: Southwest Airlines.

The discount airline picked up 18 slots at Newark Liberty International Airport, as part of United-Continental’s efforts to diffuse some of its concentration there. United-Continental will lease the slots Southwest as a condition of DOJ approval.

The deal gives Southwest more than simply a greater foot hold in the all important New York City market, it gives the Dallas air carrier a huge presence, almost overnight.

Prior to the deal, Southwest has about half-dozen slots at New York’s La Guardia airport.
By comparison, Southwest has 8 or 10 daily slots in most of its markets.

This side deal might be just a footnote in the Continental-United mergr, but it could have big implications for the industry. It will likely spur the revival of “slot swap” debate. Last year U.S. Airways and Delta Airlines proposed trading slots at Reagan National Airport in Washington and LaGuardia. The upshot of the deal was to give Delta more clout at LaGuardia and U.S. Air more heft at Reagan.

But the arrangement was blocked by the FAA because the agency said the deal didn’t benefit consumers.

The deal also raised questions about whether the FAA controlled airport slots, or the airlines did.

Helane Becker, an airline analyst at New York investment firm Dahlman Rose, said the Southwest transfer could help U.S. Airways and Delta argue that they too should have the ability to swap slots, just as United-Continental has done.

“I wouldn’t be surprised to see Delta and US Airways come back and try to get their deal done,’’ says Becker.

While the headlines focus on the mergers in the airline industries, it is these swap deals, cut on the side and often with no money changing hands, that truly reshape the airline industry landscape.