Continental selling gates in N.Y., D.C. to USAir Airline will receive 6 slots at National

November 16, 1991|By John H. Gormley Jr.

USAir, the financially troubled airline that sharply cut back its operations in May, announced yesterday that it will pay $61 million to Continental Airlines for the right to increase flights at New York's LaGuardia Airport and Washington's National Airport.

Most of the expansion will come at LaGuardia, where USAir, which is based in Arlington, Va., will acquire slots for 62 jet flights and 46 commuter flights. The airline will also take over Continental's still unfinished East End Terminal, which is due to open next year. In Washington, USAir will acquire six jet slots.

The deal was praised by industry analysts. Even though USAir expects to lose $500 million this year, the analysts said the carrier will acquire at a good prices assets that should be very profitable over the long term.

Lee R. Howard, the head of Airline Economics Inc., a Washington-based consulting firm, said USAir was smart to seize upon what may well be a one-time opportunity. "You cannot go wrong in that market," he said of LaGuardia.

LaGuardia and National are among four airports in the country where traffic is so heavy that flights must be rationed. As a result, slots at those airports are a scarce commodity that airlines buy and sell to each other. Each slot is good for one takeoff or landing.

Circumstances suggest USAir may have picked up the assets from Continental at fairly low prices. Continental bought most of what it is selling at LaGuardia less than a year ago during the liquidation of Eastern Airlines.

Continental, which is itself now in the midst of bankruptcy reorganization, described the sale as part of "the latest phase of its program to restructure finances."

Legg Mason's Jack Ciesielski called the purchases "good news" for USAir, since they preserve USAir's position as the No. 1 carrier both at LaGuardia and National.

At LaGuardia in 1990, USAir carried 15.5 percent of the passengers, for a 2 percentage point lead over the No. 2 carrier there, Delta Airlines.

"[If I were USAir,] I would be nervous if Delta had gotten more of these," Mr. Ciesielski said.

After reducing operations in unprofitable markets, USAir now seems to be expanding where it thinks it can make money.

The deal should help USAir shore up its position in its core market, the northeastern United States. USAir is the leading carrier in many of the biggest airports in the Washington-Boston corridor. In addition to LaGuardia and Washington National, it is the No. 1 carrier in Baltimore, Philadelphia, Providence, R.I., and Hartford, Conn. In Boston, it is No.2.

Mr. Ciesielski said the changes should not change the relative importance to USAir of Baltimore-Washington International Airport. He said that a great increase in flights at National would have been cause for concern in Baltimore because of its proximity to Washington. "If they got 62 slots at Washington National, I'd be worried, but they only got six," he said.

USAir now operates 113 daily and 88 commuter flights at BWI, following substantial cuts in May and several more this month.

USAir will take over 24 of the LaGuardia jet slots Feb. 1. Continental will continue to operate the remaining 38 jet slots for its winter-spring service to Florida through May 1.

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