US Airways Group, Inc. (LLC), JetBlue Airways Corporation (JBLU), Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV): Coming Soon to Washington: Cheap Flights?

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What does it mean?
Low-cost carriers like Southwest Airlines Co. (NYSE:LUV) and JetBlue Airways Corporation (NASDAQ:JBLU) are increasingly trying to win corporate customers, and growing at key airports like Reagan National is critical for them. Given that regulators forced US Airways and Delta Air Lines, Inc. (NYSE:DAL) to divest slots to limit the former to 55% of the slot pairs, it seems unlikely that American and US Airways will be permitted to keep all of their slots. I expect antitrust regulators to recommend that the companies divest 10-20 slot pairs. Southwest Airlines Co. (NYSE:LUV) and JetBlue have each worked hard to gain a small foothold at Reagan in the past few years, and they are likely to be the main bidders for these slots.

Ultimately, an expanded presence at National Airport for Southwest Airlines Co. (NYSE:LUV) and/or JetBlue Airways Corporation (NASDAQ:JBLU) would be good for travelers, as they would likely add service on some major routes that are currently monopolized by legacy carriers, thus driving down fares. This would also be good for the low-cost carriers, as it would bolster their case in competing for business travelers. While it would prove a small setback for American, the company would be compensated well for selling slots: JetBlue’s winning bid in the 2011 slot auction equaled $5 million per slot pair.

The article Coming Soon to Washington: Cheap Flights? originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Adam Levine-Weinberg is short shares of United Continental Holdings (NYSE:UAL) and is long Sep 2013 $33 Puts on United Continental Holdings. The Motley Fool recommends Southwest Airlines.

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