Delta, WestJet scrap planned joint venture after U.S. demands
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[November 21, 2020] By
David Shepardson
WASHINGTON (Reuters) - Delta Air Lines <DAL.N>
and Canada's WestJet said late on Friday they had scrapped a proposed
U.S.-Canada joint venture after the U.S. government demanded changes the
airlines insisted were "unreasonable and unacceptable".
Last month, the U.S. Transportation Department as part of its tentative
antitrust immunity approval said it would require the carriers to remove
Swoop, an ultra low-cost carrier affiliate of WestJet, from the
alliance, and divest 16 takeoff and landing slots at New York's
LaGuardia Airport.
The airlines said in a filing that the U.S. demands were "arbitrary and
capricious" especially the slot divestitures. They had argued the
alliance would "optimize aircraft utilization, enhance schedules, and
lower costs."
The airlines said in a joint statement they remain committed to
developing a joint venture "but in the meantime will explore deepening
the alliance."
The U.S. Transportation Department did not immediately comment on
Friday.
The Delta-WestJet joint venture would have had a combined 27% share of
scheduled air carrier transborder capacity, while the dominant carrier,
Air Canada <AC.TO>, has 45%.
WestJet is owned by private equity firm Onex Corp <ONEX.TO>.
Canada, with 38 million people, is the second-largest U.S. international
passenger air market after Mexico, with Toronto flights accounting for
over 50% of transborder air travel demand.
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A WestJet Boeing 737-800 airplane lands at Vancouver's international
airport in Richmond, British Columbia, Canada, February 5, 2019.
REUTERS/Ben Nelms/
U.S.-Canada transborder flight capacity has grown 15% over the last five years
to 39 million seats annually, but passenger traffic has plummeted sharply in the
face of the coronavirus pandemic.
The airlines' application had been pending with U.S. officials for more than two
years. The Canadian Competition Bureau conducted its own review and granted an
unconditional "no action" letter in June 2019.
U.S. air carriers had urged slot divestitures at LaGuardia, noting American
Airlines <AAL.O>, Delta and United Air Lines <UAL.O> control 83% of all slots,
with Delta controlling 45% of flights.
WestJet and Delta said losing slots would deprive them "of critical operating
rights at one of the most important strategic hubs in Delta's global network at
a time when Delta is
investing billions of dollars of its own capital in a comprehensive facilities
improvement project at this airport."
They would be forced, the airlines added, "to sell these strategic corporate
assets during a global pandemic that has inflicted an unprecedented crisis on
this industry, virtually
ensuring that they would be sold at a fire sale price."
(Reporting by David Shepardson; Editing by Lincoln Feast and Jacqueline Wong)
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