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U.S. Tentatively Approves Delta-WestJet Joint Venture

Madhu Unnikrishnan

October 26th, 2020

The U.S. Transportation Department (DOT) has tentatively approved a proposed transborder joint venture between Delta Air Lines and Canada’s WestJet, but is requiring the two airlines to divest coveted takeoff and landing slots at New York LaGuardia Airport.

The DOT’s order allows Delta and WestJet to embark on a “metal neutral” joint venture, giving them the rights to share revenues and costs and coordinate routes and schedules. Delta has a similar agreement with Aeromexico to the south. The Delta-WestJet joint venture would not harm competition, DOT said, because the two carriers combined would have only 27% of the U.S.-Canada market, versus Air Canada’s 45%.

During the public-comment period in the lead up to the order, several carriers, including Alaska Airlines, Spirit, and JetBlue, raised concerns about the Delta’s dominance at LaGuardia. As part of a 2011 slot swap agreement between Delta and US Airways, in which the two carriers traded slots at LaGuardia and Washington Reagan National, Delta divested a portfolio of slots at the New York airport. WestJet got 16 of those slots, which would now be effectively controlled by Delta again, the airlines argued.

Therefore, DOT in its tentative order said the joint venture is conditioned on Delta and WestJet divesting 16 LaGuardia slots through and auction. The slots, enough for eight roundtrip flights, will be auctioned in one tranche to a single carrier.

“We have received the order and are reviewing it,” a Delta spokeswoman said.

Another condition of the approval regards Swoop, WestJet’s ultra-low-cost subsidiary. Delta and WestJet included Swoop in their application for antitrust immunity. “We tentatively find that the proposed inclusion of Swoop in the [joint venture] will inhibit its role as a vigorous competitor in transborder markets and will thereby reduce competition,” DOT said. Including Swoop in the agreement would “substantially reduce competition.”

DOT’s approval is tentative, and the companies have 14 days to respond. Delta and WestJet first applied for a joint venture in 2018. DOT said it based its assessment on market conditions before 2020. “Recognizing that our proposed grant of [antitrust immunity] is likely to outlast the current market environment, we believe it appropriate to conduct our analysis using market data prior to the onset of Covid-19,” the DOT said.

Madhu Unnikrishnan

October 26th, 2020

Photo credit: A promotional image of a WestJet plane.  WestJet

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