In late 2014 Virgin America toyed with a mid-continent hub. The carrier acquired gates at Love Field in Dallas and slots at New York City’s LaGuardia Airport (LGA) and Washington, DC’s Reagan National (DCA). The carrier planted its flag and began operations, focusing on major markets where it could compete against Southwest Airlines‘ massive hub operation. When the Alaska Airlines merger closed the routes shifted from A320 aircraft to the smaller Embraer E175s that were now available. And now, as the merger progresses, the routes are dying. In its earnings call today Alaska Airlines indicated that it agreed to lease the slots to Southwest Airlines.
The viability of the routes came under scrutiny from their inception. The carrier has no feed at either end, virtually nil brand loyalty in Dallas or Washington, DC and only minimal love in New York City (thanks to the transcon routes from JFK). As Alaska Airlines refocuses its energy on the “Most West Coast” marketing plan the one-off routes to these east coast airports show themselves to be vanity-driven more than core to the operation. And so they will now go, converting to slot leases that will return better profits to the company.
In the 2014 slot allocation process, a result of the American Airlines/US Airways merger, Virgin America President and CEO David Cush called out the “mega-airlines” that it was now facing competition from. As a new entrant and smaller carrier it received access to a handful of the highly coveted slots at each airport. It also pushed hard against Southwest Airlines and Delta to gain access at Love Field. It is worth noting that one of the DOJ stipulations around approving the Alaska/Virgin merger requires that the combined carrier “shall not directly or indirectly sell, trade, lease, or sub-lease any of the US/AA Divestiture Assets without the prior written consent of the United States.” That approval was already granted. That is it now ceding these slots to Southwest is somewhat ironic in this context.
With these changes the LaGuardia stations will be closing; that is the only route the carrier operates from LGA; the carrier still operates one daily flight to San Francisco from DCA. At LaGuardia the move leaves JetBlue as the sole operator in the Marine Air Terminal.
The deal is a 10-year lease, not a sale, which is important for Alaska Airlines. The carrier can reclaim the slots at the end of the lease term if it decides further expansion on the East Coast is desired. There is also a caveat that lets Alaska Airlines reclaim some of the slots sooner than 10 years out if the perimeter rule adjusts. With the rumors every now and then about LaGuardia opening up for some longer flights given that JFK no longer needs any help forcing airlines to fly there that clause could come into play.