MIAMI — United Airlines is leaving New York’s JFK International Airport this fall, ending more than 65 years of continuous service at New York’s busiest airport. Beginning Oct. 25, United will shift its Premium Service (p.s.) product, which offers flatbeds on nonstop flights from JFK to Los Angeles and San Francisco, to its hub at Newark, swapping the slots used for those flights to rival Delta Air Lines, who in turn will give United slots at Newark.
After the slot swap, United will upgrade all of its flights from Newark to San Francisco and LA (up to 32 daily) to offer flat-bed seats in Business Class using both the p.s. fleet of Boeing 757-200 aircraft and additional flatbed configured 757-200s that United will be rotating off of flights to Europe.
The slot swap comes after seven years of continuous losses at New York JFK, increasingly an orphan station in the United network. For the years coming out of the global financial crisis, United maintained its p.s. service at JFK, reasoning that passengers’ historical preference for New York JFK in the transcontinental markets would hold. But recent shifts in the transcon market (which I explored almost two years ago), in particular the launch of JetBlue’s Mint product, have rendered whatever preference exists negligible relative to the money United was losing at JFK.
Because JetBlue is offering $599 one-way tickets in a business class product comparable to (some would say better than) that of United or Delta, the revenue advantage in premium cabin of operating p.s. flights out of JFK versus the already high First Class fares out of Newark is negligible. Ending flights out of JFK will allow United to reduce costs by eliminating the station, ending lease payments at Terminal 7 (including gates and space for the United Club), and eliminating or consolidating to Newark more than 300 employees.
Beyond the cash savings, United will also benefit in the form of new landing slots at its Newark hub, where United currently offers 428 peak-day departures. United has been hemmed in from expansion at Newark for years, and the new slots from Delta will allow it to add several new routes. For its part, Delta will use the additional JFK slots to add an extra daily flight to Los Angeles and will also upgauge two of its three daily flights to San Francisco to the Boeing 767-300ER. Meanwhile, JetBlue plans to take advantage of the vacuum left by United’s departure from JFK to heavily expand its Mint offering to 10 daily flights on JFK – LAX and 6 daily flights JFK – SFO, nearly doubling its current offering. So any hopes that United’s exit from the Transcon Wars at JFK would lead to a rationalization of capacity in the NYC-LA/SF markets was wishful thinking.
Still, the shift to Newark will likely boost United’s competitiveness, as it will be the clear frequency leader offering flatbeds in the NYC-LA/SF market(s), with up to 15 flights per day to Los Angeles and 17 to San Francisco. This will represent a substantial boost in flatbed capacity of more than 44 percent (the international 757s have 12 fewer flatbed seats), and while this capacity increase up front might be hard to fill initially, United can draw on 428 peak day departures and just under 150 destinations for connecting feed to help fill the airplanes.
Thus United will be able to counteract customer preference for JFK with customer preference for frequency, while not losing its shirt on the routes overall. And the reduction in economy class capacity (the p.s. aircraft have far fewer economy and economy-plus seats than the 737-800s and 737-900ERs that currently ply these routes) should boost fares. United has lagged behind American and Delta in average origin and destination (O&D) airfares on JFK-LAX/SFO, but the redistribution towards premium cabin seats should help improve the fare mix.
United’s Move Frees Up New Narrowbody Aircraft to Replace RJs
United’s recent spate of fleet moves is very interesting when viewed through the prism of cascading fleet dynamics. Keeping more 767-300ERs on property frees up flatbed 757-200s. That combined with consolidation in the NYC-LAX/SFO market will in turn enable United to free up domestic narrowbodies.
Looking at Thursday, July 23, United has 16 daily flights to San Francisco (9x 737-800, 1x A319, 2x 757-200, 1x 757-300, 3x 737-900ER) and 14 daily flights to Los Angeles (2x A319, 6x 737-900ER, 1x 737-800, 1x 757-300, 4x 757-200). Moreover, because Newark to Los Angeles and San Francisco are really long flights (blocked at more than six hours one way), each round trip in the market turns into two-three roundtrips at average domestic stage length.
By that logic, and assuming that the 757-200s are retired but replaced with 737-900ERs, United’s JFK cancellations and 767-300ER extension create 60 to 90 additional roundtrip flights on mainline aircraft. Those 60-90 roundtrips can replace current large regional jet (RJ) flights which can in turn be redeployed to further reduce United’s armada of 50-seat RJs.
How Many Slots Will United Receive from Delta?
Delta’s peak-day operation at Newark this summer amounts to 32 daily departures as follows:
- Amsterdam (1x daily) – 1x 767-300ER
- Atlanta (12x daily) – 12x 717-200
- Cincinnati (3x daily) – 3x CRJ-900
- Detroit (8x daily) – 2x CRJ-700, 2x CRJ-900, 1x E175, 2x 717-200, 1x A319
- London Heathrow (1x daily) – 1x 767-300ER
- Minneapolis St. Paul (5x daily) – 3x CRJ-900, 1x E175, 1x A319
- Paris Charles de Gaulle (1x daily) – 1x 767-300ER
- Salt Lake City (1x daily) – 1x 757-200
Out of those, the Cincinnati slots can be readily sacrificed, so that’s three slots right off the bat. Atlanta could probably be consolidated down to nine daily departures using 737s or A320s to backfill capacity, and Detroit could drop down to six daily, all on the 717 as Delta takes delivery of more frames. This would give United 8 slots at Newark in return for the 12-14 slots (since JFK is not slot restricted off peak, a few of United’s flights might not have a valued slot attached to them) it gives up at JFK, a pretty fair trade for both sides.
The interesting question is what regulators will think of the slot swap and if it will face any legal challenges. Southwest and JetBlue have been aggressive any time they even sniffed divestitures, although JetBlue probably isn’t interested in additional slots at JFK or Newark. Southwest can be counted on to file some sort of objection, and while JFK is a broadly competitive market where 12-13 slots won’t move the needle, eight additional slots at Newark would increase United’s dominance of a hub where it already controls more than 65 percent of O&D revenue and 70 percent of the market by passengers carried. If the DOT decides to get involved, the slot swap may well fall apart (United would probably still sell the JFK slots), but United would still carry through with the p.s. move to Newark.