How Newark Became the Face of Promoting Airline Competition in the United States
Newark is poised to face further competition from low-cost (LCC) and ultra-low-cost (ULCC) carriers. The Department of Transportation (DOT) has proposed to allow 16 afternoon and evening rush hours at Newark Liberty International Airport (EWR) to a single LCC or ULCC. In doing so, the DOT highlighted the growth of competition in the airline industry, making Newark the face of promoting competition in this industry. Here is how it happened.
2016: FAA Brings Changes to Newark
Most of the world’s most difficult airports, including London Heathrow (LHR) and New York John F. Kennedy (JFK) airports, are controlled by time slots. Airlines must have specific take-off and landing rights and times to prevent these airports from becoming too congested. EWR was one of those airports, that is, until 2016.
In 2016, the Federal Aviation Administration (FAA) relaxed its controls in Newark. Instead, the airport is governed by certain hourly and half-hourly caps on the number of take-offs and landings. If Newark is too crowded or if schedules cannot be worked out within acceptable limits, the agency could re-establish slot control if necessary.
2010: Fusion United and Continental
The 2010 merger between United Airlines and Continental Airlines caused a problem in Newark. At the time, the airport was under slot control. With the merger, the surviving United would have the largest presence at the airport, but the Department of Justice (DOJ) was concerned about the implications for competition at the airport.
So in August 2010, the DOJ and United Airlines and Continental Airlines agreed to transfer 36 slots to Southwest Airlines. At the time, Southwest was not operating at the airport and the government identified Southwest as a low cost carrier that would increase competition in Newark. United, however, remained the largest airline at the airport.
United were able to maintain their dominance at the airport even after the FAA made changes to Newark. In large part, schedules in Newark are determined by a season’s past schedules, making it more difficult for new carriers to access when airlines are using all or most of their slots.
2019: the South West withdraws
In July 2019, Southwest Airlines announced its withdrawal from Newark. The move would be effective from November 2019. The airline would still serve the region through New York LaGuardia Airport (LGA) and, on Long Island, MacArthur Airport (ISP) in Islip.
Southwest’s 36 slots included 16 highly desirable “rush hour” operations. It operates from 7:00 a.m. to 8:59 a.m. and 1:30 p.m. to 9:59 p.m. Newark local time. These are generally the times of greatest demand for flights to Newark.
With Southwest leaving the airport, Spirit Airlines immediately jumped into the fray, demanding that slots continue to promote low-cost competition in Newark. The problem, however, was that the DOT and FAA were considering abandoning Southwest’s 16-hour rush hour operations to limit congestion at the FAA. Despite some opposition, including concerns from the DOJ’s antitrust division, the FAA has moved to remove Southwest’s entire peak block of slots.
2020: the crisis hits
Last year was an anomaly, but it presented a huge opportunity. With nearly all of the airlines cutting their services, Newark’s operations have opened up to new carriers. One airline that jumped into the fray with many new flights was JetBlue.
In June 2021, JetBlue had a 14.6% market share at the airport, compared to 58.5% for United. Spirit Airlines had a 7.5% market share. However, JetBlue added the most number of new routes compared to Spirit and American as it became more present at the airport.
JetBlue has significantly expanded its schedule from Newark, including adding more premium products through the use of its Mint product on lucrative transcontinental routes. Newark was an opportunity for JetBlue to expand its portfolio of flights from the New York area.
At the same time, Spirt did not forget about Newark, and a court case continued. Even though the airlines temporarily pulled out, the industry knew that a rebound would eventually occur. In the long run, having a presence in the New York area would continue to be lucrative.
2021: The FAA loses its case
In May, the District of Columbia Circuit Court of Appeals for the United States ruled against the FAA and in favor of Spirit Airlines. The ULCC argued that the FAA’s decision was “arbitrary and capricious,” and the court accepted and overturned the FAA’s decision to revoke peak flight clearances previously held by Southwest.
This led the FAA and DOT to review Newark’s operations and begin seeking to restore flight operations. Finally, on Thursday, September 16, the DOT announced that it would be bringing back 16 afternoon and evening rush hours to the EWR for a single low-cost or super-low-cost carrier.
Both Spirit Airlines and JetBlue are the primary candidates to bid on and potentially receive the slots. It is not known which airline could leave with the slots, but both airlines have arguments for and against receiving them. The process will probably take some time.
The backdrop is President Biden’s executive order on competition in various sectors of the economy. Newark has become the face of increasing competition in the airline industry. As Deputy Secretary for Transport, Polly Trottenberg said:
“Opening more slots in Newark to lower cost carriers will give air travelers more choice and lower prices. DOT’s action today is part of the Biden-Harris administration’s larger effort to create a more competitive economy that benefits the American consumer.
Although the ruling on the case was announced long before the executive order was signed, the Biden administration still points to it amid increasing competition in an industry that has seen significant consolidation over the past decade. For many reasons, Newark is a well-functioning airport for this role. Airports in the New York area are congested and expensive, but EWR offers one of the best opportunities for an LCC or ULCC to step in and develop more services in the area. One example of the still hotly contested nature of New York-area airports includes the American-JetBlue alliance, against which calls for a review are mounting.
It’s hard to say what would have happened in Newark without Spirit Airlines taking the decision to court. However, now the airport will experience increased competition, which could benefit consumers and airlines. Time will tell how these slots will be used, but so far it looks like a slam dunk for LCCs and ULCCs and could have broader implications in the future.