Consumers could be the winners if the $11 billion merger of American Airlines and US Airways allows Southwest Airlines to add service from Reagan National Airport.
The merger’s impact will be felt at all three major airports in the D.C. area but it’s Reagan National that’s likely to be most affected, since American and US Airways operate nearly two-thirds of the flights from DCA.
In general, the merger partners’ routes don’t have as much overlap as most recent mergers but in cases like National, where the two control a majority of the gates at an airport, antitrust regulators are likely to require the merged entity to give up some of its slots there.
Southwest and JetBlue are both thought to be thirsting after slots at National, which is good news for Washington-area flyers thanks to the “Southwest effect,” which holds that air travel increases and average fares decrease when Southwest enters a new market or markedly increases its route schedule. Southwest filed in December for permission to fly between DCA and Houston Hobby Airport.
The two-pronged “Southwest effect” occurs as consumers take to the skies more often when Southwest’s low fares and liberal reservations policies take effect and as competing airlines are forced to cut their fares on routes shared with Southwest.
This effect may not be felt as drastically at National, thanks to the large number of corporate and government flyers, who are not as sensitive to fare differences as individual travelers but it is still likely to open up new travel opportunities for Northern Virginia and D.C. consumers.
For decades, National has been a stronghold of US Airways, formerly USAir, itself the result of a long line of mergers stretching all the way back to Allegheny Airlines, founded by the du Pont family in 1939 and headquartered at National.
After airline deregulation in 1979, Allegheny changed its name to USAir, hoping to shed it regional image and, critics would contend, a reputation for poor service, high fares, habitual over-booking and general tardiness. Wags at the time made light of commercials heralding the merger, saying “Agony Airlines is becoming Useless Air.”
Neither Dulles nor BWI is likely to be directly affected by the merger, since neither carrier is dominant at those airports.
Southwest looking for slots
In December, Southwest filed an application with the U.S. Department of Transportation (DOT) for slot exemptions that would allow Southwest to offer nonstop service between DCA and Hobby (HOU). Ronald Reagan Washington National Airport (DCA) and William P. Hobby Airport (HOU). The proposed service is possible due to Spirit Airlines’ discontinued use of the slot exemptions, which are available for use inside Washington National’s traditional 1,250 mile service perimeter.
Southwest’s application points out that current average fares for nonstop service between Houston and Washington National are more than 60 percent higher than Southwest’s average nonstop fare between Houston and BWI, a similar distance. Southwest projects that its proposed HOU-DCA service would attract tens of thousands of new passengers and save consumers millions of dollars annually.
A decision by the DOT is expected in the first quarter of 2013. Southwest is prepared to begin service this spring if awarded the slots.