Spirit wins Newark slots, with conditions to keep them

Spirit Airlines led the legal charge to ensure the slots Southwest Airlines abandoned at Newark would be reallocated. Now, after much legal wrangling, the carrier won the rights to those 16 slots. The US Department of Transportation issued its ruling late Tuesday, picking Spirit over JetBlue and Alaska Airlines for the slots.

[T]he Department finds that, of the applications received, Spirit will best be able to provide competition consistent with the Department of Justice’s (DOJ) original competition remedy that is the source of the timings.

– DOT Decision

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The DOT wanted to issue all 16 slot to a single airline. Alaska Airlines only applied for four of the slots and was immediately disqualified from consideration.

In deciding between JetBlue and Spirit, the DOT focused primarily on Spirit’s lower operating costs and the likelihood that would translate to lower fares for travelers:

Spirit maintains a 32 percent cost advantage over JetBlue, and a 46 percent advantage over United. This will effectively allow Spirit to offer lower fares to more customers while maintaining the profitability necessary to remain an effective competitor at EWR.

– DOT Decision

Moreover, the DOT explicitly wants to see more direct competition with United Airlines at Newark in hopes that will bring fares down, the tradeoff demanded by the Court in determining that the slots should be reallocated. In that context Spirit’s 100% overlap with United on its routes at Newark is considered an advantage in this competition.

Spirit’s limited presence at other NYC airports (nil at JFK, 22 daily slot pairs at LaGuardia) relative to JetBlue’s market leading position with its American Airlines Northeast Alliance also skewed the decision process.

The DOT also considered flight cancellation and delay levels. The performance of both airlines is woeful, however neither proved to be particularly worse than the other, though both are seen as poor performers by the Department. As a result the slots come with conditions.

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Citing “Spirit’s higher relative number of customer complaints received by the Department” the DOT will require Spirit to deliver a quarterly report on displaced customers. This must include:

• The number of passengers impacted by flight disruptions who were able to be reaccommodated on Spirit within 12, 24, 48, or 72 or more hours
• The number of passengers that Spirit reaccommodated on other carriers
• The number of impacted passengers who were not able to be reaccommodated
• The number and value of hotel and food vouchers provided to affected passengers

The award appears to require this network-wide from Spirit, not just at Newark.

Merger mania

The award of these slots also comes against the backdrop of JetBlue’s bid to buy Spirit. Should that deal be approved JetBlue has promised to divest all Spirit’s slots and gates in New York City and Boston as a condition of approval. Should that be required these slots (plus a few more) may very soon be once again up for grabs.

Maybe Breeze would try to snag them? Frontier already bailed once, though it might reconsider with less competition.