JetBlue Airways and WestJet Airlines are about to get a boost at New York’s LaGuardia Airport and Washington’s Ronald Reagan National Airport. JetBlue submitted the winning bid for two bundles of eight slot pairs, one at LaGuardia and one at National, according to Bloomberg. WestJet said that it won a bundle of eight slot pairs at the New York airport in a statement.
JetBlue at LGA. Expect to see more of this. (Photo by Phil Derner)
The bids were for 32 slots at LaGuardia and 16 slots at National divested as part of the Delta Air Lines and US Airways slot swap agreement that was approved by the US Department of Justice in October. In addition to JetBlue and WestJet, Southwest Airlines said that it would bid on the slots and Allegiant Airlines, Frontier Airlines, Spirit Airlines and Sun Country Airlines were also expected to submit offers. The Federal Aviation Administration (FAA) will formally announce the winning bidders following the close of a binding agreement with the divesting carrier on December 1.
JetBlue could spend over $72 million on the slots. The airline is believed to have submitted the highest bids on all three bundles – they all ended in $50.01 – but can only win one bundle at LaGuardia based on the auction guidelines provided by the FAA. The high bids were $32,000,050.01 for both slot bundles at LaGuardia and $40,000,050.01 for the slots at National. A spokesperson for the airline declined to comment.
Robert Mann, an airline industry analyst at RW Mann & Company, said it will be interesting to see whether JetBlue uses the slots to attract more business travellers or on routes to its focus cities in Florida. One possible use would be to launch a National-LaGuardia-Boston shuttle operation.
“If they are going after the corporate market, as they have been during past few years, they will get a lot more corporate business on the shuttles then to Florida,” he said of JetBlue, though he noted that they would be a bit short on slots to run an hourly operation out of both LaGuardia and National. “It’ll be an interesting question on how interested they are in becoming a fixture on the northeast corridor.”
WestJet has more to gain from the slots at LaGuardia. While JetBlue is already a force to be reckoned with in the New York area with its hub at JFK International Airport, the carrier only has seasonal service between Newark International Airport and Calgary, its home base. The slots will give it access to the region’s most sought after airport and the opportunity to capture a slice of the lucrative trans-border business travel market. It submitted an offer of $17,600,001.00, the second highest, for both slot bundles at LaGuardia.
Former LGA operator WestJet is expected to be returning, on what is a strong business route for them. (Photo by Ron Peel).
“This is a once-in-a-lifetime opportunity,” said Gregg Saretsky, president and chief executive of WestJet, in a statement. “Our ability to now serve New York demonstrates we are focused on delivering on our business traveller strategy.” He noted that New York was the largest international business market from Canada.
Where WestJet will fly is less clear. The New York-Toronto market is already served by five airlines – Air Canada, American Airlines, Continental Airlines, Delta and Porter Airlines – and competition is stiff. However, it is also a signature route that the airline may be willing to fly at a loss. WestJet’s lack of a significant presence elsewhere in eastern Canada makes other options less ideal.
Mann said a flight to Calgary or Vancouver via Ottawa may be a possibility. He added that it will be interesting to see if the FAA will approve their bid considering their existing code-share with American and pending alliance with Delta.
Southwest’s potential failure came as a surprise. Many expected it to have submitted the highest bids for the slots at LaGuardia because of the success of its existing operation there and public expression of interest ahead of the auction. If it did bid, the third highest offers were $8,240,224.00 for bundle A and $13,040,224.00 for bundle B – or about $1 million per slot pair and $1.6 million per slot pair, respectively. A significantly lower valuation than JetBlue’s $4 million per pair or WestJet’s $2.2 million per pair.
LaGuardia and National operations are about to get quite the shake-up. Regardless of who the winners are, an interesting question is where they will locate their new flights at each airport. Existing gate space is occupied though how Delta and US Airways adjust their gates at National and Continental and United Airlines combine their operations at both has yet to be disclosed. Eight slot pairs require at least one gate if not two, according to Mann.
The FAA closed the slot reallocation auction at 5pm on November 22. It received five bids that ranged from $1 to the $40 million winning offer for the National slots. LaGuardia bundle A received eight bids and bundle B 10 with the range the same as National except with the highest being $32 million.
Edward Russell is a financial journalist and airline enthusiast based in New York. The son of a pilot, he’s been spotting and collecting airline memorabilia since a young age and has been writing about airlines in the US and Asia since 2006. Follow him on Twitter @e_russell.
