March 7, 2013 Other Entrants For the Brazil Slots.
Sorry for being away for the past couple of days, I’ve been kind of sick. But anyways on the with the show.
Previously, I reported on American applying to start LA-Sao Paulo this year and Chicago-Sao Paulo next year. Now airlines had 15 days to file bids. After those 15 days had expired, US Airways and Delta both filed bids. You can read all of the information in the bids in the regulations.gov link at the bottom of the page. Now lets start with U.S. Airways bid.
U.S. Airways is asking for 7 frequencies starting this October for Charlotte-Sao Paulo and 7 starting in 2014 for Philadelphia-Sao Paulo. Currently, U.S. Airways is leasing the frequencies to run Charlotte-Sao Paulo from United, so getting these frequencies would obviate the need for the lease.
Delta is asking for 14 frequencies to run Atlanta/JFK- Sao Paulo to start this year and 7 frequencies to start Detroit Sao-Paulo next year.
So there are 14 frequencies to be allocated this year. Delta wants all 14, American wants 7, and US wants 7. There are also 14 slots next year Which Delta wants 7, AA wants 7, and US wants 7. More applicants than frequencies so some will win and some will lose. Let’s start with this year.
Now, US and AA are trying to merge. I am not a huge fan of the merger, but it will probably go through. I think the DOT will look at the bids as if AA and US will have merged. LAX has three times weekly service on Korean Air, CLT has daily service on US via leased UA frequencies, New York has 2 daily flights on AA, daily flights on UA, Tam, and DL, and Atl has a daily flight on DL. I think seven of the fourteen available frequencies will go to American to serve LAX-GRU, it is the most under-served market and it isn’t served by an American carrier. For the other seven it becomes for difficult. I don’t think US will get the seven frequencies they want for two reasons. First, they are merging with AA. So, if US won, one carrier will get 14 slots which would be anti-competitive. Second, there wasn’t a UA bid so UA isn’t in a hurry to start new South American service so it is possible that if US surrenders its lease from UA, UA just turns around and turns in the frequencies to the DOT. This is something the DOT does not want. So, because of those two reasons I think the other seven frequencies will go to Delta. Now the choice for the DOT here is JFK and fortress ATL. I think the DOT will go with JFK. There is more demand on JFK-GRU than ATL-GRU and it would increase competition with AA, UA, and Tam.
So, this year I expect to see
Delta get another daily flight on JFK-Sao Paulo, and
American start a daily flight on Los Angeles-Sao Paulo
Currently, Chicago has a daily flight on United, Detroit has a daily flight on Delta, and Philadelphia has no flights. This one is more of a toss up. Does the DOT give all the frequencies to AA and US to start service in PHL and compete with UA out of Chicago, or does one of those get scrapped in order to allow Delta to second daily flight out of DTW. Even though AA and US would get all the frequencies, I think they will get them and Delta will get nothing in this round. Having AA start ORD-GRU increases competitive pressure in that market. Having US start PHL-GRU is brand new service, so I think that is one the one given here. Delta already runs DTW-GRU and they don’t have max lift on the route; Delta uses a 767-400 which is smaller than one of their 777-200’s or 747-400’s. So, I think there isn’t enough demand for the DOT to justify giving the frequencies to Delta.
So, unless the DOT allows another bid from another airline here’s how I think the awards go in a nutshell.