Southwest To Fly to Newark Thanks to United/Continental Merger

On Friday afternoon, Southwest announced it came to an agreement with Continental to lease 36 slots at Newark. Holy crap. Has hell frozen over? Nah. Just two hours later, Continental and United announced that the Department of Justice (DOJ) has found no antitrust issues with the merger. Ahhhh, I get it. That was easy.

I’m talking more about this from the Continental/United perspective at BNET, but here I want to focus on Southwest. An airline that used to consider Islip a New York City airport will now be serving two of the biggest and most congested airports serving New York. Crazy.

Southwest Comes to New Jersey

This slot deal will allow Southwest to have 18 flights in and 18 flights out per day, unless they figure out some magical way to have more departures than arrivals. I’m gonna guess that physics makes that a tough sell. The first flights will begin next March with the full amount of slots going into Southwest’s possession by June.

This move is really funny when you think about it. It’s old-school Southwest meets new-school Southwest. Yes, the airline is flying into one of the most crowded, delay-filled airports in the US. You never would have seen that 10 years ago. But it’s also the tried and true Southwest strategy of bracketing a big metro area. You now have LaGuardia on the east (along with Islip on the waaaaay east) and Newark on the west. (It also conveniently brackets New Jersey with Philly on the South. That’s about as close as you’d want to get to NJ anyway.)

So what is Southwest gonna do with this? Well, 18 flights is a lot. It’s more than double the measly 8 flights they were able to squeeze into LaGuardia. At LaGuardia, there are five daily flights to Chicago/Midway and 3 down to Baltimore. But for Newark, we have some good guidance. Take a look at what the DOJ had to say about this:

The proposed merger would combine the airlines’ largely complementary networks, which would result in overlap on a limited number of routes where United and Continental offer competing nonstop service. The largest such routes are between United’s hub airports and Continental’s hub at Newark airport, where Continental has a high share of service and where there is limited availability of slots, making entry by other airlines particularly difficult.

In other words, Chicago/Midway, Denver, and Houston/Hobby have to be a lock. Baltimore? Probably. (And, as I talk about on BNET today, Continental and United must be happy not to have exact airport competition on these routes.) You could probably fill a schedule with that pretty easily, but there could be other cities as well.

Unlike from LaGuardia, Southwest can run Phoenix or Vegas from Newark, if it so chooses. The reality is that with Southwest’s focus on business travelers, Florida might not make as much sense. Sure, you can always fill those airplanes, but with scarce slots, that doesn’t seem like the best plan. Then again, maybe we’ll see Florida at some off-peak times.

Southwest has to be thrilled to have benefited from the merger here. Apparently the feds were happy with this deal as well. It may not seem like a huge number of slots, and really, it isn’t. For United and Continental’s nearly 450 flights per day, this is a drop in a bucket. Then again, Southwest does know how to make a drop in the bucket feel like a tidal wave.

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30 Comments on "Southwest To Fly to Newark Thanks to United/Continental Merger"

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Andrew
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I’ll bet some other (read: Virgin America) airlines are screaming about this.

Why would the feds allow one airline to benefit from this instead of holding an auction for the number of slots they wanted divested, or something along those lines?

Matt
Guest

Does this mean that CO will now have to makes cuts at EWR in line with these 36 slots that they no longer have?

Bill from DC
Guest
yes but most of that would likely come from overlapping service that would be rationalized anyway. UA’s three existing EWR-ORD CRJ-700 flights could be replaced w/ one mainline flight (UA also has two mainline flights and CO has four). IAD is another potential slot saver. currently, UA has four ERJ145 flights and CO has six Dash 8-200 flights. these 10 flights could obviously be served by six larger aircraft while still providing plenty of service throughout the day. just these two examples, if my assumptions are accurate, would save 12 slots. i am sure there is more duplicative service that… Read more »
DGS
Guest
With all the news that broke on Friday, I was curious to see which item you would tackle first. Safe to say, I think you’ve got plenty of topics to hit on this week. I think UA/CO must have been watching the collapse of the DL/US deal and figured that the easiest way to get this through quickly was to play ball with SWA. For SWA, I’d agree that they shouldn’t waste slots on low-yielding Florida traffic. Yes, it’s the largest destination for the NYC area, but there’s heavy competition from all corners, and they can easily connect over BWI… Read more »
Nick Barnard
Member

Re: “unless they figure out some magical way to have more departures than arrivals” Sure there is.. Just get Boeing to build them at EWR. Given that this is Southwest we’re talking about, its within reason…

David SF eastbay
Member

Now how will DL/AA/B6 counter this attach from Southwest at EWR?

Bill from DC
Guest

hey brett – am i a complete idiot or is there some reason i can’t find the BNET piece you are referring to?

Grant
Guest
Brett says: “A great question, of course. Southwest was complaining that the US/DL slot swap wasn’t transparent enough and they wanted an open auction. Apparently that doesn’t apply when they’re the beneficiary.” You sure do have a chip on your shoulder about Southwest lately, don’t you? First you make their flight attendant union look like a bunch of greedy thugs trying to bully the company into who-knows-what with the possible introduction of the -800 and now this. What I think you failed to mention is that UA/CO is LEASING these slots to Southwest. UA/CO will still OWN them. They are… Read more »
Bill from DC
Guest

so you are saying that the DOT is more appeased by a temporary leasing arrangement (which, presumably, could be revoked at some point in the future) as opposed to an actual swap? the reverse of your argument would make more sense to me. why would a temporary arrangement be preferable to a permanent one?

MrSkyGuy
Guest
Two things jump out at me with this announcement: 1) WN has bracketed not only the NY area, but the mitigation of delays impacting the entire system. This is primarily handled through closed-loop setup from (speaking primarily of LGA here) BWI and MDW. EWR will be a different story, as I expect DEN, HOU, MDW and perhaps a Florida hop or two to fly out of EWR. 2) The 738s appear to be SWA’s next answer to airport space/slot restrictions. If the 738s do eventually find service at SWA, I’d expect to see DEN, MDW, and HOU with at least… Read more »
Jim Brown
Guest

You know, Brett (or anyone else willing to undertake this task), a roundup on the slot situation at the high-density airports in the United States would be an excellent article. I didn’t even realize that EWR is now a slot-controlled airport! I assume, DCA, LGA, JFK and ORD are still the only other slot-controlled facilities? And who controls ownership these days? Is Buy-Sell still the predominant regulation that controls these slots? Do airlines still get to use them as assets on their balance sheets? Inquiring minds wanna know!

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