Virgin America Purchases Eight Slots at Reagan National Airport

Feb 19, 2014 4:05 pm ET

Feb. 19 (Bloomberg) -- Virgin America Inc. won flying rights at Ronald Reagan Washington National Airport, as American Airlines Group Inc. sells off assets required from its merger with US Airways Group Inc. last year.

Virgin America, the low-fare airline partly owned by U.K. billionaire Richard Branson, said in a statement today that it will buy eight slots. The carrier joins Southwest Airlines Co. and JetBlue Airways Corp., which acquired rights for a total of 39 round trips at the airport in January.

The sale is part of the U.S. Justice Department’s requirement that American shed 104 slots at Reagan, enough for 52 round trips, and that the buyers be airlines that would expand competition and offer more low fares. That condition was part of the settlement of an antitrust lawsuit opposing the AMR Corp.-US Airways tie-up on grounds that the combination would be too dominant at the airport closest to downtown Washington.

“We’re pleased to have the opportunity to offer our new service at DCA and LGA and help shake up the market for consumers,” Virgin America Chief Executive Officer David Cush said in today’s statement.

American was also required to divest slots at New York’s LaGuardia Airport. Southwest agreed to buy 12 flight slots in addition to taking over 10 it had leased from American, while Virgin won 12. Landing rights at LaGuardia and Reagan are coveted because both have flight caps to help alleviate congestion at airports that are popular with business travelers due to their proximity to the cities’ downtowns.

Financial terms weren’t disclosed.

IPO Delay

Virgin America’s purchase comes three months after Cush said the airline’s initial public offering would be pushed back to late 2014 at the earliest while the Burlingame, California- based carrier focuses on showing sustained profits. Virgin halted fleet expansion in 2012 and delayed jet deliveries until mid-2015 as it works to build a record of earnings.

“If they can make money at National and earn a decent margin on it, then it would make sense for them because their singular goal right now needs to be establishing a track record of profit,” Hunter Keay, a New York-based analyst with Wolfe Research, said in an interview in January.

American, the world’s largest airline, will still operate a majority of the flights at Reagan, with 57 percent. The combined airline would have had 69 percent of Reagan flights without the slot sale, the Justice Department said in its original complaint. The merger was completed in December.

Under the lawsuit settlement, US Airways and AMR also agreed to give up two airport gates each at Boston Logan, Los Angeles International, Chicago O’Hare, Dallas Love Field and Miami International.

As a result of the slot sale, American has said it will drop daily nonstop service between Reagan National and 17 cities, including Savannah, Georgia and Tallahassee, Florida.

--With assistance from Mary Schlangenstein in Dallas. Editors: James Callan, Stephen West