US Airways CEO Disputes Need for Reagan National Divestiture

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CHARLOTTE, N.C. ( TheStreet) -- The possibility of slot divestures at Washington's Reagan National Airport remains the key question in the pending merger between US Airways and American

At a hearing Wednesday before the Senate aviation subcommittee, various concerns were raised by senators and by a consumer group, but much of the focus was on slot divestiture. The Department of Justice is reviewing whether this ought to be a condition of the merger.

Without divestiture, the new American would have about two-thirds of the slots at National, but US Airways CEO Doug Parker told the committee it would have just 50% of the seats because it allocates many slots to serving small cities with smaller aircraft. If other airlines were given the slots, they would likely fly to larger cities, he said.

Susan Kurland, Transportation Department assistant secretary for aviation and international affairs, said that "service to smaller communities is important to DOT." She said that if the Justice Department seeks divestiture, the DOT would seek to ensure that "the merged carrier would have a slot portfolio sufficient to serve small communities as well."

Parker noted that when US Airways and Delta were required to divest National slots in 2011, in order to enable a trade of slots at New York LaGuardia for slots at National, JetBlue used the slots it purchased to add three daily Boston flights, increasing the overall number of National-Boston flights to 25, as well as to add flights to Fort Lauderdale, Orlando, and Tampa, all of which had at least a half dozen daily flights.

Meanwhile, Parker said, US Airways cut its least profitable flights from National, meaning that Madison, Wis., and Grand Rapids, Mich. lost service entirely. "If it is a choice to ask us to divest slots and give them to another carrier, we by definition with a scare resource will continue to (serve markets) that are most lucrative," he said. "We'll reduce service to small and midsize communities, and the carriers that get those slots will fly to large communities."

Operating a hub at National means that US Airways is able to include small cities in its hub network. Parker referred to two cities, Little Rock and Manchester, which had just been mentioned by senators from Arkansas and New Hampshire as cities that benefit from having National flights. He said that only a hub could aggregate enough connecting passengers to serve either one from National.

A few other sticky issues also surfaced. Sen. Maria Cantwell (D-Wash.) said that in the debate last year over FAA reauthorization, US Airways had advocated for loosening the perimeter rule which limits long-haul flying from National -- it now serves San Diego. If new American advocates again for the same thing when the next FAA reauthorization comes up, the result could be a loss in service to small cities, Cantwell said.