Virgin Awarded Love Field Gates

[scoreboardII]

The DOJ is requiring divestment of the gates which means that they go back to the City of Dallas. A sublease by AA to VX is not a divestment in this case since AA would retain ownership of the gates. That's why the Dallas City Council is holding a vote later this week. They will ultimately decide which Airline will get the gates, not AA, VX, or the DOJ.

^^^^^ Most likely outcome.

 

[HowardBorden]

The DOJ is requiring divestment of the gates which means that they go back to the City of Dallas. A sublease by AA to VX is not a divestment in this case since AA would retain ownership of the gates. That's why the Dallas City Council is holding a vote later this week. They will ultimately decide which Airline will get the gates, not AA, VX, or the DOJ.

I agree, I think it is clear that Dallas is thinking the same thing, or they would have simply turned over the gates to Virgin when the DOJ stipulated Virgin was the only acceptable candidate. However, if Dallas decides to turn the gates over to Delta, or SWA or keep them under their control as common use gates, how much power does the DOJ have to force them do do something else. It is very clear that the DOJ had the power to force the divestitures as part of their anti-trust remedy, the question is do they have the power to force Dallas to do as they say with the gates after they are divested. It seems clear that they had control over who was eligible to obtain the slots that were divested, but the slots did not have DCA or LaGuardia claiming they should be returned to them when AA was forced to abandon them. The gates at Love clearly have another authority claiming they are able to make that decision.

 

[Saluki Dawg]

Short answer is no. DOJ can recommend but has no authority over the City of Dallas.

 

[SWA Bubba]

I agree, I think it is clear that Dallas is thinking the same thing, or they would have simply turned over the gates to Virgin when the DOJ stipulated Virgin was the only acceptable candidate. However, if Dallas decides to turn the gates over to Delta, or SWA or keep them under their control as common use gates, how much power does the DOJ have to force them do do something else. It is very clear that the DOJ had the power to force the divestitures as part of their anti-trust remedy, the question is do they have the power to force Dallas to do as they say with the gates after they are divested. It seems clear that they had control over who was eligible to obtain the slots that were divested, but the slots did not have DCA or LaGuardia claiming they should be returned to them when AA was forced to abandon them. The gates at Love clearly have another authority claiming they are able to make that decision.

Technically, the DOJ did not abrogate any part of the 5-party agreement. I don't think they actually have the power to do that. What they did do was get American to volunteer to divest them in order to get DOJ's blessing for the merger. If American said, "hell, no, we're keeping the DAL gates no matter what," the DOJ couldn't force them to do so. All the DOJ could do would be put up a bigger stink about the merger between AA and US. And who knows, maybe the merger would have happened anyway. Remember, the DOJ just filed a lawsuit, and it was going to court to be decided.

As far as American agreeing, I think it was no big deal to them. Remember, they weren't using those gates anyway. It's the same with some of their slot pairs that they "gave up." They weren't even using them in the first place (they were subleased to others). It was just a face-saving measure for both American and the DOJ: "See? look how much we're giving up to ensure proper competition remains." It's pretty easy to "give up" something that you're not using anyway, and it makes the whole divestiture package simply look bigger and more like a sacrifice.

Bubba

 

[HowardBorden]

Technically, the DOJ did not abrogate any part of the 5-party agreement. I don't think they actually have the power to do that. What they did do was get American to volunteer to divest them in order to get DOJ's blessing for the merger.

True enough, the proposed settlement was accepted by AA voluntarily in order to get the DOJ to drop their lawsuit and speed the merger along rather than fighting it out in the courts. Good point.

 

[Notunderpar]

First, L.E.K Consultants did a study for the city of Dallas that said Southwest Airlines would be the better choice for two American Airlines gates up for grabs at Love Field. Then on Monday, Virgin America issued a rebuttal to the study and why it should have the gates.
Southwest Airlines executive vice president Ron Ricks at Monday's City Council transportation committee meeting (Terry Maxon/Dallas Morning News)

Early Wednesday evening, Southwest released its rebuttal of the Virgin America rebuttal to say why the study was right and why Southwest should have the gates.
We reprinted the Virgin America rebuttal in its entirety, and we’ll do the same for the Southwest rebuttal. And if you click Delta law firm letter to Dallas mayor and City Council, April 28, 2014, you can see the 11 pages that Delta Air Lines sent the mayor and City Council on Monday explaining why the city should take over the gates from American. The submittal also includes a letter from Delta in February asking that the city make two gates and part of a third available for its Dallas flights.
Here goes the Southwest response:
1. Love Field (DAL) is not a separate market isolated from the rest of Dallas, and Southwest has no “monopoly” on Dallas gates or air service. DAL and DFW make up a single Dallas air service market that is dominated by American, not Southwest. Even with 2 additional Love Field gates, Southwest would have only 10% of all gates in the Dallas market. American would have 67%.
2. The DOJ’s lawsuit which ultimately forced American to divest its Love Field gates was intended to increase competition against American at DFW. It was not concerned about competition at Love Field. Southwest will provide more competition to American if it secures two additional gates at Love Field. Virgin is primarily seeking to move its service from DFW to DAL rather than add new competition in the Dallas market.
3. Virgin America’s current Dallas fares are higher than Southwest’s fares once Virgin’s fees for checked baggage ($25 on both first and second bags) and ticket changes ($150) are included. Southwest does not charge passengers those fees. Southwest’s estimated fares from DAL to LAX and SFO would be 7% to 9% below Virgin America’s current fares.
4. Virgin America has increased its fares at DFW much more than Southwest has at DAL. Last year Virgin increased its DFW fares over 18% while Southwest increased its DAL fares only 3.6%. Since starting service to DFW in 2011 Virgin America has increased its fares 37% while Southwest increased its fares at DAL less than 4% over the same period.
5. Virgin America’s claims about Southwest not fully utilizing its DAL gates are untrue. Southwest is currently limited to the equivalent of 13 gates at Love Field due to construction at the airport and and Wright Amendment limitations. Once the Wright Amendment is repealed and construction completed, Southwest will operate an average of 10 flights per gate per day on 16 gates (160 flights), and will add 20 more daily flights if it is able to operate on the two American gates.
6. Southwest’s use of 2 additional gates at Love Field will create six times more jobs in Dallas than would Virgin America’s proposal. The airline that brings in the most passengers will create the most jobs, and Southwest will bring in almost six times more passengers to Dallas than Virgin America. The job creation comes from new visitors spending money in the local economy, and most of the new jobs will be created outside the airline industry. The LEK study did not factor in in non-airline jobs and thus significantly under-estimated Southwest’s impact on creating new jobs.
7. The fact that the DOJ directed American to lease its gates to Virgin America in no way obligates the City of Dallas to approve such a transaction. The City was not a party to the DOJ’s lawsuit against American, and its responsibility is to manage its airport in a way that is best for the City, its residents, and businesses.
8. Therefore the key question is what is best for the City of Dallas? Southwest’s proposal for the two gates would produce head-and-shoulders the greatest benefits for the City, in terms of the number passengers carried, new travel options for consumers, jobs created, and new competition provided in Dallas. Virgin America is trying to elevate its private corporate goals (to move from one Dallas airport to another) over the welfare of the City.
9. Southwest’s proposal for the two gates is the only option that would allow all three interested airlines the ability to grow in Dallas. Assigning the gates to any other carrier will block Southwest from expanding in Dallas and result in less air service to the City than would be provided under Southwest’s proposal. Southwest is the only airline whose growth in Dallas is restricted to Love Field.
10. The Five Party Agreement which granted Southwest the rights to 16 gates at Love Field did not in any way bar Southwest from expanding service at DAL if additional gates became available. Two additional gates are now available, and the City should assign them consistent with the goals of the Five Party Agreement as well as to further the City’s economic interests. Assigning the gates to Southwest Airlines is the only clear way to achieve those objectives

 

[DCMartin]

Looks like DOJ won't let Dallas choose SW or DL

http://cityhallblog.dallasnews.com/...west-delta-gates-that-should-be-virgins.html/


Feds tell Dallas officials they will reject proposal to give Southwest, Delta the Love Field gates that should be Virgins
By Robert Wilonsky
[email protected]
8:53 am on May 6, 2014 | Permalink


Sir Richard Branson was the reigning rock star at last night's Virgin America party at The Rustic (Michael Ainsworth/Staff photographer)

Virgin Americas party at The Rustic Monday night had originally been scheduled as a victory party the shot of tequila (or 10) after the signing of some paperwork that would have given the airline two gates at Dallas Love Field. Instead it became a Free Love Field? rally led by no less a cheerleader than the airline?s rock-star founder himself, Sir Richard Branson, who still found time for a shot of tequila and a shot at Southwest.

They're no longer the David, he said of the Dallas-based airline. They're the Goliath, and sometimes Goliath needs a little competition. They have 90 percent of the traffic out of Love Field, and all we?re asking for is 10 percent. And with that 10 percent we can offer competition and give people choice.

The Department of Justice agrees. Again.

In a letter sent to Dallas City Attorney Warren Ernst and Dallas City Manager A.C. Gonzalez on Monday, William Stallings, the DOJ's Transportation, Energy & Agriculture Section chief, reminded 1500 Marilla that the feds want those gates, which are currently American Airlines, to go to Virgin and only Virgin not Delta, not Southwest.

Virgin, says Stallings, has no existing presence at Love Field and will introduce a new competitor at that airport Delta, a legacy carrier, is not an appropriate divestiture candidate [and] we rejected the proposal by Southwest given its already significant presence at Love Field, an airport that is gate constrained pursuant to law.

Justice wants Gonzalez to sign Virgin's lease. Anything less would be unacceptable, says Stallings. Despite a second Dallas City Council briefing on the matter scheduled for Wednesday, which is built around a consultant's study that recommends giving Southwest the gates, Stallings makes it very clear: We would also reject a proposal from the City of either of these two acquirers.

Council member Philip Kingston one of three members of the city council at the Virgin party, including Scott Griggs and Carolyn Davis says it's time to honor Justice's wishes and move on.

It's a contractual dispute, he said Monday night. We have a lease, we need to follow the lease. If my colleagues think there's something to be gained by gaming the lease, i think they may be mistaken. A.C. was worried about the policy and litigation implications, and wanted the input of council. That, I think, is on the side of discretion. I am not critical of that. But I do think he needs to go ahead and sign the thing.

 

[HowardBorden]

This just keeps getting more and more convoluted! From the DOJ letter to Dallas:

"American and Virgin America will soon be requesting your official approval of the Sublease pursuant to the terms of American's lease. We would appreciate your approval of that request. Doing so will allow American to fulfill its agreed-upon--and court-ordered--divestiture requirement and will help ensure a smooth transition and additional competitive benefits for Dallas passengers."

What does that mean? Of course they would appreciate the city council do do what they are requesting. My question still remains: can they force Dallas to approve that request?

 

[waveflyer]

Good question

 

[Saluki Dawg]

This just keeps getting more and more convoluted! From the DOJ letter to Dallas:

"American and Virgin America will soon be requesting your official approval of the Sublease pursuant to the terms of American's lease. We would appreciate your approval of that request. Doing so will allow American to fulfill its agreed-upon--and court-ordered--divestiture requirement and will help ensure a smooth transition and additional competitive benefits for Dallas passengers."

What does that mean? Of course they would appreciate the city council do do what they are requesting. My question still remains: can they force Dallas to approve that request?

I don't think they can. Otherwise, why wouldn't DOJ just award the gates to VX if they didn't need City of Dallas approval? It sounds like they're just sending a threatening letter to the City in the hopes that it rattles their cages enough to get them to just sign off on the VX sublease with AA. It looks like we got ourselves an old fashioned Mexican standoff, and we'll just have to see who blinks first.:uzi: