Slot Divestitures and Price Competition at Reagan National and LaGuardia

The American Airlines/US Airways merger was initially challenged by US antitrust authorities partly because of the airlines’ significant takeoff/landing slot concentration and direct (overlap) competition at slot-controlled airports, Reagan National and LaGuardia. The approval of their merger required that they divest slots to other carriers. This paper examines whether these divestitures have preserved price competition in markets in which the merging airlines directly competed. We find that in the case of Reagan National, they have not, as prices increased in these markets. Instead, most of the procompetitive price effects have been in nonoverlap markets. In the case of LaGuardia, however, the divestitures preserved price competition in both overlap and nonoverlap markets. Several factors that affect the estimates include route direction, degree of overlap, distinction between nonstop and connecting routes, and carrier identity.