Wednesday, November 19, 2008

Southwest Airlines to Buy ATA for New York La Gaurdia Slots

Southwest Airlines 737-3K2 N345SA arrives in Las Vegas (LAS).
(Photo by Michael Carter)

Southwest Airlines Co. plans to buy ATA Airlines so it can obtain the bankrupt carrier's operating slots at New York LaGuardia Airport, the airline confirmed Tuesday evening.
Southwest spokeswoman Beth Harbin said the airline intends to start service out of LaGuardia, assuming the U.S. Bankruptcy Court in Indianapolis approves Southwest's bid of $7.5 million.
"We're working with ATA Airlines with the conditions and terms of the bid," Ms. Harbin said. "The intent is not to operate ATA Airlines. The intent is to allow Southwest Airlines to acquire the LaGuardia slots."

The deal, first reported by Bloomberg News, would give Southwest the control of 14 takeoff and landing slots, sufficient to operate seven round-trip flights a day. While Southwest has operated on Long Island out of Islip, N.Y., since 1999, it has bypassed the three major New York-area airports, LaGuardia, Kennedy and Newark. Its strategy has long been to avoid congested airports like the New York facilities and to fly to secondary airports where operating costs and air traffic control problems would be less. However, as it has begun to run out of those types of airports and markets to enter, Southwest has turned its eye to markets it previously avoided.

Southwest chairman and chief executive Gary Kelly recently announced plans to launch flights in March to Minneapolis-St. Paul, a connecting hub for Northwest Airlines Inc. In the last two years, it has re-entered the highly competitive San Francisco market and Denver. Now, Ms. Harbin said, Southwest officials think it is time to enter LaGuardia. "We've matured to the point where we can contemplate it," Ms. Harbin said. "Gary has said several times that if there are prudent opportunities out there, we should be looking at them. This is certainly one." Ms. Harbin stressed that although Southwest has legally offered to buy ATA Airlines, it is doing so only to gain control of ATA's LaGuardia's slots. "We're being very clear that it doesn't include any aircraft, facilities or employees of ATA," she said.

In bankruptcy

Southwest had once competed heavily against ATA out of Chicago Midway. But after ATA filed for bankruptcy its first time, Southwest worked out a deal in 2004 to buy gates and other facilities at Midway and to share passengers with ATA, including having ATA carry Southwest customers from Chicago to LaGuardia. ATA exited bankruptcy in 2006. But after months of mounting losses, the carrier filed for bankruptcy again earlier this year and ceased operations. It already had stopped service to New York, and its grounding also left Southwest without any way to get its customers to Hawaii. Southwest's bid, which was filed Tuesday evening by ATA, will be taken up in hearings scheduled for Friday and Dec. 2 in the Indianapolis court.

In its request for approval of the deal, ATA told the bankruptcy court Tuesday that the FAA had been talking for months about whether ATA could retain control of the slots it was no longer using, since the federal government has proposed redistributing some of the landing and takeoff rights at the New York airports. "The FAA indicated during those discussions that it would only recognize the continuation of the operating authorities through a sale of the company," ATA said in its filing.

Only bidder

ATA said it leases 12 of the LaGuardia slots to AirTran Airways Inc., as well as two at Washington National. Although 13 parties had expressed interest in bidding, ATA said in its filing that Southwest wound up being the only bidder. ATA attorneys and Southwest officials met for five hours Nov. 10 in Dallas. "As part of that negotiation session, the debtor was successful in getting Southwest to increase materially the purchase price for the business and also negotiated the exclusion of the debtor's slot rights at Ronald Reagan Washington National Airport from the assets comprising the business," ATA said. The documents indicate that ATA and Southwest expect the deal to close March 2.

(Dallas Morning News)