Delta, WestJet drop joint venture plans over 'arbitrary and capricious' US conditions

Delta Air Lines and WestJet's plans for a broad partnership is off, like a wedding cancelled on objections of one party's parents after "onerous" conditions put forth by U.S. officials.

The carriers withdrew their application for an immunized joint venture, calling the conditions "arbitrary and capricious," in a regulatory filing on Friday (Nov. 20). The pact would have allowed Delta and WestJet to coordinate on flights between the U.S. and Canada.

Delta and WestJet will re-evaluate "options to deepen our commercial alliance," the former told staff in a message on Friday viewed by TPG.

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The airlines already codeshare on some flights and have a frequent flyer pact that allows travelers to earn and redeem miles for flights on the other carrier.

The proposed joint venture, however, would have significantly deepened their ties. The carriers argued that the proposed partnership would benefit consumers by allowing them to coordinate flights and add new service between the two countries. This would have created a stronger competitor to Air Canada, which dominates the market and had a nearly 44% share of flyers in 2019.

Slots at sought-after New York LaGuardia (LGA) airport were central to Delta and WestJet's decision. The Department of Transportation required the carriers divest eight slot pairs — one pair is needed for both a takeoff and landing — at the popular New York airport as a condition to their joint venture. The number of slots is equal to the number owned by WestJet, which uses them for flights between LaGuardia and Toronto Pearson (YYZ).

"The divested slots would almost certainly not even be used to compete with the [joint venture]," said Delta and WestJet in their filing. "They would likely be redeployed by the recipient to use in domestic or other markets which are outside the [joint venture] scope."

Related: US signs off on Delta and WestJet partnership, if they give up LaGuardia slots

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Alaska Airlines, Allegiant Air, Southwest Airlines and Spirit Airlines all submitted comments supporting the slot divestitures to the DOT. Of those, Alaska alone flies to Canada, but only along the West Coast and not from either New York or Toronto.

The LaGuardia-Toronto route was the single busiest between Canada and the U.S. in 2019, according to U.S. Bureau of Transportation Statistics data via Cirium. Air Canada, American Airlines and WestJet were the only airlines flying the route. Delta, Porter Airlines and United Airlines also flew between other New York- and Toronto-area airports.

However, much about future Canada-U.S. air service remains up in the air amid the coronavirus pandemic. The border is closed to all but essential travel through Dec. 21 as it has been since March. And airlines plan to fly just 11% of what they flew a year ago in the market in December, Cirium schedules show.

Related: WestJet cuts 5 cities in eastern Canada, blames coronavirus and fee increases

In addition, Porter known for its popular, business-friendly flights to Toronto's close-to-downtown Billy Bishop Airport (YTZ) has suspended flights through at least February.

In their filing, Delta and WestJet also called DOT conditions onerous for excluding WestJet's budget subsidiary Swoop from the partnership and requiring WestJet to interline with other U.S. carriers onerous.

Canadian regulators approved the airlines' proposed pact with no conditions in 2019.

Related: Delta Air Lines, WestJet Partnership Gets Canadian Sign Off