Why Southwest is Leaving Newark

When it announced its second quarter earnings, Southwest rightfully spent a fair bit of time talking about the 737 MAX grounding and the impact it was having on the airline’s operations. At the same time, it announced it was pulling out of Newark entirely. The line was drawn between the two — and many have assumed that there was a direct correlation — but really, it sounds like more of a good excuse than anything else. Newark wasn’t performing very well overall, so Southwest decided to walk away despite the allure of hanging on to gate space at a constrained airport.

For those who have been watching Southwest’s ever-changing Newark experiment since it began in 2011, this isn’t much of a surprise. I took a look at government T100 data via VisualApproach.io and here you can see scheduled Newark departures by month and destination.

Southwest has bounced its Newark network around like a ping pong ball searching for anything that would be mildly successful, but it never succeeded in developing a full schedule that worked. In its 2Q 2019 earnings press release, Southwest didn’t try to hide its troubles.

The financial results at Newark have been below expectations, despite the efforts of our excellent Team at Newark.

Was Newark really that bad? It’s not a straightforward answer.

The Good

The only constants throughout Southwest’s adventure have been flights to Chicago and St Louis, and those were probably the best performers. The success in St Louis is likely because United has been flying 50-seat regional jets consistently on that route. There are no customer upgrade opportunities on what is a pretty long flight, so Southwest was instantly more competitive. That is bound to change as United flexes into larger-gauge airplanes, so there are storm clouds on the horizon for Southwest in that market.

But Chicago, well, Chicago is a mega-focus city for the airline and it has to work. In this case, you might be surprised to hear it worked better in Newark than at LaGuardia, the airport that will now become Southwest’s sole focus in New York City. (No, I don’t count Islip.)

According to Diio, Southwest’s average one way local fare for the year ending in Q1 2019 was $119 from Newark to Chicago… and only $103 from LaGuardia. Of course, LaGuardia is about 75 percent local while Newark is closer to 65 percent, but still… it does make you wonder why Newark is going while LaGuardia stays. They key to that is looking beyond these markets.

An Island In a Sea Of Red

One route — or two — does not make a station successful. Newark started with early short-haul flying, but a lot of it didn’t work (think Baltimore, Nashville the first time, Indy…). It veered into longer-haul flights that couldn’t be run from LaGuardia thanks to the perimeter rule, but those haven’t done well at all.

For example, sticking with the same data set, Oakland to Newark had a mere $142 one way fare. (If you want to compare, Oakland to Baltimore was more than $50 higher.) San Diego to Newark was a slightly better — but still not good for an airline with few ancillary opportunities — $159 each way (compared to $204 in San Diego to Baltimore). Oh, and United in the Newark-San Diego market? It pulled down a $280 average fare.

In other words, long-haul was sucking wind, and many short-haul options didn’t seem to work either. Could Southwest have shrunk its Newark operation down to just one gate and run a handful of flights to Chicago, St Louis, and maybe one other spot? Yeah, it could have. But then again, Southwest doesn’t like small stations. The airline seems to have decided that just wasn’t worth it in this case.

The Gateway to New York City

Southwest looks at New York differently than United or Delta. The airline’s strategy isn’t about competing for the New York/New Jersey-based traveler; it’s more about appealing to the Southwest loyalists who want to go to New York. (This isn’t much different than American’s strategy, in that sense.)

Newark faces increasing price pressure as Spirit and Allegiant ramp up, but more importantly — for the person going to New York as a destination — Newark is a tougher sell. Passengers just simply don’t look toward Newark the way they look toward LaGuardia as the gateway to the city.

It’s hard to say why that is after all these years, especially considering what a mess it is to fly in and out of LaGuardia these days. It may be that people just don’t think of Newark as part of New York City (which, of course, it’s not). Southwest undoubtedly made things worse for itself there as well by not coaxing its website to show both LaGuardia and Newark options when travelers searched for New York. They had to search separately for each airport, and that hurts for an airline that takes most of its bookings through its own site.

So Newark was never ideal for Southwest, but it was a way for the airline to get more capacity to serve the region when options weren’t available at LaGuardia. That recently changed.

(Positive!) Changes at LaGuardia

Southwest appears to have had a plan to find a way to grow enough at LaGuardia to enable it to walk away from Newark and still maintain the capacity going to the city. But how could it do that with LaGuardia being slot-restricted?

First, Southwest was able to pick up six more slot pairs from Alaska when that airline pulled out of the Dallas/Love Field to LaGuardia market. On top of that, Southwest recently moved into the new terminal at LaGuardia which means it can now operate 737-800s easily at every spacious gate instead of having to settle for wedging a 737-700 into some gates. This will increase capacity up to 175 seats per flight from 143.

These two changes mean that Southwest can put a lot more seats in the market at LaGuardia, and it won’t miss the seats it gives up in New Jersey… at least for now.

Will Southwest regret walking away in the long term? Possibly. When an airline planning department sees a constrained airport, it starts salivating wildly, because it fears it may not get back in if it leaves. Heck, if Lincoln, Nebraska put slots in, there would probably be a line waiting for access. (Note to Lincoln: You’re welcome for that new air service development strategy.)

While Newark isn’t currently slot-controlled, gate space is scarce. I figured Southwest would be like all the others and hold on to its precious assets as long as it could. Surprisingly, it didn’t. Did the MAX help that decision? Probably. But it was most certainly not the only reason, let alone the primary one.

Now Southwest will likely have to live with its current LaGuardia capacity as being its ceiling in New York… unless, you know, it decides to do something crazy like buy JetBlue. Wouldn’t that be interesting….

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52 Responses to Why Southwest is Leaving Newark

  1. Sean in MKE says:

    Good summary, Brett. To what extent do you think increasing their Hawai’i schedule played a role in the Newark decision? They’ve freed up some aircraft to focus on another strategy that’s been stalled due to the MAX grounding.

    • CF says:

      Sean – I mean, it’s hard to know. But I think that they idea that they had a better place to use those assets played into it. If they had MAX airplanes flying, maybe they’re more willing to let Newark limp along for longer. But they want to keep growing Hawai’i and they have no MAX flying, so they need airplane time.

  2. SirWired says:

    I’ll tell anybody that asks that if you are going to Manhattan, EWR is, by far, the best choice, all else being equal. There is a quick, cheap, and fairly reliable transportation connection direct to downtown (NJ Transit/Amtrak), which most certainly cannot be said for LGA or JFK, where your choices are awful bus/subway rides or praying your Taxi/Uber won’t get stuck in a horrible jam.

    Not to mention that EWR, while not the World’s Greatest Airport, is not “If Dante’s Inferno had an airport, it would be LGA”.

    • Matthew Pouy says:

      I mean JFK has more public transit options LIRR to midtown, and like 3-5 subway lines that take you to various points across the city.

    • Alex says:

      1. Weekend transit service to/from EWR sucks. The train times are all bunched together, so if you arrive right after (for example) the 3:15 pm train has left, you have to wait 49 minutes for the next train at 4:04 pm.

      2. EWR Terminal C is nice, but EWR Terminals A and B are much worse than any of the current LGA terminals. The biggest problem is that they have separate security areas for each concourse (3 concourses in each terminal), which means that TSA is spread too thin and often doesn’t have the manpower available to have a PreCheck line open in the concourse you’re using, even at busy times. Showing up at the airport and unexpected not having a PreCheck line *sucks* and forces you to add padding to when you plan to arrive at the airport.

      • hk says:

        Your first point is really critical that gives visitors hard time. People should stop talking that EWR transportation is equivalent to the other airports from Manhattan, because it isn’t for the visitors. Residents know the system and they might view differently.

      • Andy says:

        In theory Amtrak covers some of NJTransit’s gaps, but they can be pretty expensive and there’s still some holes in the schedule

        • Alex says:

          1. On weekends the Amtrak trains are bunched into the same window that the NJ Transit trains are. The bunching is actually imposed by scheduling for the Hudson River Tunnels, which both of them share. So with rare exceptions Amtrak won’t save you time.

          2. Amtrak is super expensive if you buy the ticket last minute, but I would also never buy a ticket in advance, because arrival time to the train station is too unpredictable. If my flight arrives slightly late or the AirTrain has a hiccup, then I miss the Amtrak train and lose the cancellation fee. If I get to the station earlier than anticipated, then I would often be better off taking an NJ Transit train that shows up before my Amtrak train.

          Overall taking Amtrak to EWR doesn’t really make sense unless you’re coming from farther away (Philadelphia, Wilmington, etc.)

    • CraigTPA says:

      When I lived in Manhattan I generally preferred JFK over EWR for public transportation, especially on weekends. Part of this is just a severe dislike of PABT, and on weekends NJTransit to EWR has serious timing issues. But either is preferable to LGA.

  3. Breaking News: LNK (Lincoln, NE.) to become slot restricted. That was a good laugh…

    Tomorrow, Friday, there are 3 UA non stop flights, DEN to LNK. aircraft – Embraer ERJ-135/145

    Flight time is 1 hour, 27 minutes.

    Denver departures are at 08:00, 11:10, and 20:20.

    One way fare is $ 334. to $ 400.

    • Dave says:

      And, they all land at the butt-end of B-Gates (or as I refer to them, the bus station). Crowded, cramped, noisy, and full of people who have no idea how to walk in an airport.

      No wonder I favor UA to ORD, rather than DEN – only use DEN when forced to go west. Of course, ORD with the intra-terminal train down changes this calculation somewhat.

  4. charlesr says:

    Did youever try tofly onSW from SoFla to EWR ?
    You had to goto MDW PHL used to be OK, but not now SW is not the Airline for So Fla

  5. Jeff says:

    I work at United and everyone says we are buying jetBlue. Keep your hands off Southwest!

    • Anthony says:

      DOJ will never allow that.

      • Tory says:

        I’ve wondered about the potential of this. Actually, it does seem like something that could maybe get through the DOJ? JetBlue’s two major cities are Boston and JFK, and both have plenty of Delta and AA competition but very little or no existing UA. Would be a bold move for UA, and cement them as the preferred airline of NYC.

        • Andrew says:

          They’ll have to pry NYC from Ed Bastian’s cold dead hands

        • Noah says:

          lots of potential for UA with BOS, Florida, but not sure it is worth the hassle that comes with it —

          1) regulatory environment – I’d imagine approved, but at what cost and timeframe
          2) management distraction. Every minute of merger is a minute of not innovating. All mergers frustrate customers – DL and AA would steal share
          3) Labor upheaval

          If United really wanted something like that, they might be better picking specific fights and flooding capacity vs. paying a hefty multiple for Jetblue just to get rid of duplicate services such as EWR-Florida. They want the action on HPN-PBI – nothing stops them from entering the market today. In either case, I don’t think investors would be happy as the benefits of a merger don’t seem so significant relative to the costs and risks.

          The only slot constrained assets may not be super valuable to the combined airline — DCA, JFK, LGA, LGB all of which have nearby competing United service and aren’t either small or big enough to remain at their current size in a combined carrier. I just don’t see connections flowing over JFK instead of EWR for instance, and JFK isn’t big enough to look like MSP / DTW for Delta.

          So it is a creative idea, but hard to see it happening.

        • TDF says:

          A very good idea. .Jetblue is a north south airline United more of an east west and it gets United back into JFK reversing the mistake of them ever leaving. My thoughts are EWR and JFK are two different markets with the only overlap being people that want to go to Manhattan so plenty of competition so there should not be regulatory problems .

    • henry LAX says:

      UA buying B6 is what i’ll call “negative synergy” because of how ridiculously overlapping their sizes and ops are at JFK+EWR without any meaningful chance of growing either hub. On top of all that, UA has to deal with a weird combo of MCO and FLL hubs that are hardly in line with their approach.

      Southwest buying jetBlue is also ridiculously laughable considering jetBlue has Mint and heading to Europe while WN doesn’t even know how to fly to Canada. jetBlue has partnerships with airlines like Emirates while Southwest interlines with jack.

      • CraigTPA says:

        In all fairness to Southwest, JetBlue and Spirit don’t fly to Canada either, and Frontier only flies to one city (Calgary). Outside of the three network carriers, as far as I know Alaska is the only one that has a material Canadian presence, and that’s only in the west.

        Canada’s high taxes make it easier for LCCs/ULCCs to serve Canadian customers and Americans going to Canada by offering service to nearby destinations on the US side of the border (Buffalo, Niagara Falls, Plattsburgh, Burlington, Bellingham, even Detroit for southern Ontario). JetBlue also gets some business traveler connections by working with Porter.

  6. DesertGhost says:

    Maybe Southwest has been consistently profitable because it knows when to walk away.

  7. Anthony says:

    EWR is not technically slotted, but the FAA is not allowing new capacity in peak times (1400-2059) and is locking in airline schedules YoY through the days. Southwest capacity is not even going to be redistributed because of how capacity-constrained EWR is. The FAA is taking that capacity back for OTP buffers.

  8. chris.chang says:

    Great post.

  9. TWATexan says:

    I agree with SirWired, EWR is so much easier to use that LGA. And the train options into Manhattan are many and often.

    Living in Texas I also used Alaska’s DAL to LGA flights. CF, why in the world would Alaska give up those valuable slots? Almost every flight that I was on was 90%+ full, mostly with business people.

    • CF says:

      TWATexan – The flights were fairly full but the fares couldn’t have been very high. It just wasn’t something that made sense for Alaska to continue.

      • Andy says:

        If the fares were anything like they were in the VX days then AS wasn’t making any money.

      • Tim Dunn says:

        the only reason VX and later AS was in the Love Field market was because the DOJ inserted itself into the American/USAirways merger in which Southwest got a chunk of slots at DCA and argued to have a weak carrier be allowed to fly from Love Field rather than American or Delta that could have provided real competition for Southwest.
        WN is very political but they have rarely been able to change the marketplace in competitive markets. WN’s single cabin, very simple product is appealing but it provides very little incentive for high value passengers to choose WN over a legacy given the raft of incentives a legacy can throw at business passengers.

        They are leaving EWR because they can’t change the economics of competing with legacy carriers

        WN veered from its previous strategy of operating from secondary airports to thinking it needed to compete in the US’ top markets even if it meant competing against legacy carriers. There will be an increasing rebalancing of WN’s network where it competes directly against legacy carriers to a strategy that looks much more like WN’s former than current strategies. The greatest amount of WN capacity cuts since the MAX grounding have been in legacy carrier hubs and markets while WN continues to grow in their own focus cities and strength markets.

  10. Bgriff says:

    The new concourse at LGA may have more ramp space, but when Southwest has more than a single departure going at a time, it severely lacks for passenger space inside, especially with Southwest’s lineup system. I was shocked how chaotic it was in there for a brand-new facility. It doesn’t help that, in maximizing space for aircraft parking outside, gates are crammed into the corners (as is common in multiple NYC airport terminals) which creates a real crunch for passenger space inside. It’s still better than the old facilities, but it’s hardly SIN.

    That said, I never visited Southwest’s home in the old LGA gates, which I imagine must have been even worse trying to do the lineup in those cramped little gate areas.

  11. MarylandDavid says:

    I’m a little baffled by WN at Newark. They announced a few months ago that they were reinstating BWI-EWR which will obvioulsy end. (Interestigly, the BWI wikipedia page has it resuming in September and ending in early November. Will they really run it for a month?). Could the airport simply have raised fees on them substantially? Also, not sure I buy that Newark is not seen as a NY area airport. It is the 14th busiest in the U.S. , ahead of Phily, MSP and other majors. I am sure they are getting their share of NY metro traffic.

    • Andy says:

      It’s the 14th busiest because it better serves the large portion of the NYC metro population that lives in New Jersey, and has a Star Alliance international hub. But almost no one sees it as a true NYC airport.

      • henry LAX says:

        hahahahah “no one sees it a true NYC airport” ….. do you live in NYC ? do you know shit about the world ?

        • MarylandDavid says:

          Yes, I do and have plenty of friends in NYC who fly out of Newark all the time. Why so nasty and hostile? I know plenty about the world.

        • Ty says:

          Born and raised New Yorker and its true, we do NOT consider EWR a New York airport. Everyone who live in the 5 boroughs go to either JFK or LGA. You even mention EWR and we revoke your right to live in the city. give me a $40 ride to JFK or LGA or the Airtrain to JFK any day over the subway/ NJ Transit/ Airtrain combo to get to EWR. Life is just easier at JFK and LGA

  12. JayB says:

    Airline competition in America.

    Develop your fortress hub. Raise those fare, slowly but consistently. Unbundle them, showing that fares are really coming down. Convince the travelers those regional replacement planes are just what they’ve always wanted. Wave bye-bye to the non-legacy competition.

    Wow! Competition works, maybe not for you. but where are you going to turn to?

    If leaving EWR isn’t enough, which hub will WN be pulling out of next?

    • Andy says:

      That’s true here in Atlanta, but NYC is one of the most price competetive markets on the planet, with almost every route having competition…

  13. Tim Dunn says:

    Let’s call this for what it is:
    1. Southwest has never done well in legacy carrier hubs except for Denver where it was able to rapidly grow post 9/11 when United was weak.
    2. Alaska and Southwest winked at each other as they signed the LGA slot lease deal; LUV gets less competition at Love Field while ALK bails on LGA where they were too small to be relevant. AS loses a competitor at EWR.
    3. The judge in the Love Field AS/DL/WN case is pushing for a settlement so it is likely that AS and WN are cooperating in both NYC and Dallas where Delta is also growing.
    4. Other than ATL, WN does not fly to any AA or DL hubs from LGA, making it much more likely for them to succeed at LGA than they could have from EWR where UA was on top of everything WN did.
    5. The abililty to use larger aircraft at LGA – as has been noted – helps WN compete at LGA, esp. to Florida where most other airlines are using A321s to most of the destinations in Florida for significant parts of the year. The lowest cost aircraft are necessary to compete in major leisure markets.

    There will be no mergers of any big 4 US airlines – AA, DL, UA or WN with each other or any other carrier, not just because the DOJ won’t allow it but also because all 4 have higher costs than any other remaining airlines. Most of AS, B6 or any of the ULCC’s routes won’t work at big 4 costs.

    WN aggressively tried to push into major markets such as NYC, WAS and ATL that it neglected in its early years and is now finding that there are places where it can succeed in those markets but not all of the routes it has tried (or acquired in those cities) work for them. The MAX grounding is simply the opportunity for WN to rationalize its network around its strongest markets which is what the big 3 did post 9/11.

  14. Ayrman says:

    “Southwest doesn’t like small stations.”- Ahem, except for LGB, where their yield continues to compare quite unfavorably to all of their other SoCal airports.

    • Tory says:

      I really don’t understand this. LGB is so convenient to OC and SNA is slot/gate constrained with high prices. Seems like it should be a slam dunk.

    • MichaelJay says:

      LGB is a long game for Southwest. Even though Cranky lives in Long Beach, he is very negative on LGB and swore up and down that when slots were available WN would NEVER grab them. But in fact he was wrong… and WN continues to grow capacity at LGB… the reason is the long game to win more slots from JetBlue who failed at LGB because they pursued the leisure travelers and not enough frequencies for business travelers.

      • Tory says:

        The difference is that SWA has (essentially) hubs at LAS, DEN, and PHX they can easily feed from LGB, whereas JetBlue has no such options.

    • CF says:

      Ayrman – I’m thinking of a small station as being less than 12 daily flights since that’s when Southwest starts having to in-source and it requires a couple gates. Long Beach is above that threshold now. But point taken. It is an outlier.

  15. EWR neighbor says:

    65% local EWR vs 75% LGA. While LGA is an o&d airport maybe WN was inadvertently feeding UA’s int’l routes. Perhaps they bailed out ’cause UA swiped their used 737 700’s to fill the Max gap.

  16. BL says:

    IIRC, Southwest requires customers to search airports separately across their entire system (rather than allowing city-based IATA codes), not just NYC. I assume this is intentional, and I really wonder why.

    • henry LAX says:

      Knowledge is power, so obscuring it is a way to prevent customers to conveniently shop for the lower price if they’re airport agnostic. It’s the bet on people losing their patience when trying to search 3 airports in Bay Area and 5 airports in LA Basin if they’re agnostic to any combination of those, and end up overpaying for “good enough”.

      For instance, I’m extremely agnostic between EWR LGA JFK but won’t consider Islip unless in the most dire situations. Southwest’s own website makes is so annoying one wouldn’t wanna go back and patronize them if other carriers provide a much more pleasant searching experience… which is most ironic from the airline that proclaims “Transfarency” that is anything but their own motto.

  17. shoeguy says:

    Great article and you’re absolutely correct. WN isn’t interested in competing with DL, UA, AA, B6 for PoS originating in NYC. It sells tickets TO NYC. I would not be surprised if eventually, down the road, WN closes LGA as well. For the right price, they’ll sell the slots.

  18. CraigTPA says:

    I understand Southwest’s reluctance to run a very small station, but I’m not sure they’re really considering that this means they’re pretty much writing off the entire state of New Jersey north of Princeton, and probably a little further south on the Shore. North and Central New Jersey’s second airport choice is usually JFK, since they’re more likely to drive and want to leave their car at the airport. I have several friends in the Red Bank/Middletown area, and most of they would never consider LGA unless the fares were incredibly low. This also applies to a lot of Staten Island – driving to EWR was their easiest choice.

    If Southwest served JFK, they’d still have a shot at some of this market – but they don’t.

    • Alex says:

      I think Southwest’s choice to not list fares on OTAs effectively means they need a fairly high share of a specific market in order to attract origin traffic from that market. Leisure travelers won’t find WN flights on Kayak, Expedia, etc. – they need to be aware that Southwest is an option at their hub, and actually be willing to go to southwest.com to check availability and fares. Likewise, business travelers generally won’t see WN flights on their travel portals, although there are exceptions.

      In markets where Southwest is a substantial fraction of the traffic, locals learn quickly through word-of-mouth that it’s worthwhile to check southwest.com. In Newark, they only served a small and somewhat random collection of destinations, so there wasn’t a sufficient population of people with experience flying Southwest from EWR to build this awareness, and people who actually checked southwest.com were likely to be disappointed with the options.

      In summary, “small stations” isn’t necessarily a problem, but “small fraction of local origin traffic” is a big problem.

    • Alex says:

      On a separate note, I find Frontier’s bet on the Trenton-Mercer airport to be pretty interesting. It’s a *much* more pleasant experience to get from central NJ to TTN vs. JFK. However, most of the central NJ residents that I know seem to not even be aware that flying from TTN is an option. It’s possible that the flights aren’t operating at a sufficient frequency to develop meaningful word-of-mouth awareness that you should include TTN in your flight searches. Alternatively, the passenger experience on Frontier might be bad enough that people don’t recommend it to others even if it’s cheap and convenient.

  19. JMB1957 says:

    Newark Terminal A is being reduced for the construction of the new Terminal One. SWA is losing gates.
    Additionally, I have understood that the station was not at peak operating levels. As a frequent traveler, I ONLY consider EWR if absolutely necessary. While you can get into Manhattan, you cant get to Brooklyn, Staten Island or Queens from EWR. But dont worry LGA will be a dream, in 2025.

  20. AnneK says:

    Does anybody think that Southwest letting go of EWR in favor of LGA means that the (some say, anachronistic ) Perimeter Rule at La Guardia might finally be on its way out?

    • John says:

      There is no doubt in my mind that Southwest Airlines has big plans for LGA when the Perimeter Rule is lifted. I believe the lifting is actually in a holding pattern until the terminal project is completed. It will be a game changer for sure.

  21. John says:

    “Now Southwest will likely have to live with its current LaGuardia capacity as being its ceiling in New York… unless, you know, it decides to do something crazy like buy JetBlue. Wouldn’t that be interesting….”

    Many are waiting to see just what Southwest will do since Mr. Kelly has been promising 50 destinations since 2014 and will tell just about anyone employee that he/she is on the cusp of the announcement. Talk about a holding pattern. Southwest turns 50 in 2021. I wonder if that has any bearing on the announcement.

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