The precedent is neither dangerous nor troubling. WestJet acquired their LGA slots as a competition remedy -- to prevent greater dominance at LGA by Delta as a result of their slot swap with US Airways. It makes zero sense for resources granted or acquired as part of a remedy for an anticompetitive transaction to later come under the direct or indirect control of the beneficiary of the anticompetitive transaction. If JetBlue, for example, were to acquire slots at LHR as a remedy for the AA/BA transatlantic joint venture, they most certainly should not subsequently be permitted to use those remedy slots if they were to join the joint venture at some later date.
Likewise, United was not required to give up slots on ORD-YYZ when it acquired ATI with AC.
Slots at ORD weren't tied to specific routes, and UA has faced head-to-head competition at ORD from AA for decades. And IIRC slots at ORD had been phased out by the time UA and AC applied for their transborder JV.
Respectfully, this is one of the worst DOT policy decisions in decades. It is an abandonment of the free market principles of Open Skies - and a green light to countries like Japan and China that use restrictive slot policies at their airports to frustrate the growth of U.S. carriers. The U.S. has railed against that for years, and is now doing the same thing to an underdog carrier from one of our best bilateral aviation partners, Canada.
Delta and WestJet do not compete on LGA-YYZ. There is no competitive harm from an antitrust perspective. AA/BA involved direct nonstop competitive overlap of more than 30 daily flights on six U.S.-LHR routes. Even then, DOT only required AA/BA to give up just four slot pairs -- much less American's entire LHR slot portfolio. DOT's airport concentration theory at LGA is not based on sound antitrust principles, and is just "social engineering" to favor LCCs. As applied here, it is Robinhood in reverse, taking away slots from WS which barely has a toe hold at the airport in the underserved U.S.-Canada market, and auctioning them to SWA and JetBlue for still more duplicative flights to FLL and MDW.
Together DL and WS have less than 45% of the slots at LGA. Just across the Hudson River at EWR, United has greater than a 70% share, but EWR slots are not confiscated and redistributed when United adds a new Star ATI partner. Nor should they be.
Imagine a hypothetical where some years from now we have an open skies bilateral with China. China Eastern holds a dominant slot position at Shanghai/PVG. CAAC says, gee, we'd like to have more new entry at Shanghai, so, Delta, you can have a JV with China Eastern -- you just have to give up all of your slots at PVG so we can auction them off to Chinese carriers. China Eastern can do all the actual flying out of the most important airport, and you can codeshare on them. We've got room for U.S. carriers to operate their own-metal JV services to Chengdu.
This is very unfair to WS, and puts them at a long term disadvantage to Air Canada and United. Incidentally, DOT approved the now defunct American/Canadian ATI alliance back in the 1996 which involved direct nonstop overlap on New York-Toronto, but did not require slots to be divested.
WestJet cannot use any of its slots on LGA domestic routes, since it is prohibited cabotage. It will therefore, by definition, have zero impact on U.S. domestic competition or concentration. If DOT was really concerned that the JV would pull the slots out of Canada and redeploy them on domestic routes (of which there is no indication) it could have solved the problem with less restrictive means by just requiring that WS remain the operator. The WS slots are not tied to the specific route - but can be used for Montreal, Halifax, Ottawa, etc. Unfortunately, WS is not allowed to use the LGA slots to serve its important hub at Calgary because YYZ is outside the LGA perimeter. Yet, conveniently, DEN is "grandfathered" in as an exemption to the Perimeter Rule for U.S. carriers. These is exactly the type of airport restrictions and slot policies the U.S. has been complaining about in Japan for years. Guess where JCAB got the idea for a Haneda perimeter rule? Yup. Right here in the USA.