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Analysis: Slot Restrictions Come off at Newark on October 30

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Analysis: Slot Restrictions Come off at Newark on October 30

Analysis: Slot Restrictions Come off at Newark on October 30
October 17
12:15 2016

MIAMI — Beginning on October 30, 2016, the Federal Aviation Administration (FAA) will officially designate Newark as a Level 2, schedule-facilitated airport. The move will drop the airport’s current Level 3 classification, which imposes slot restrictions on airport operations.

Newark is limited to no more than 81 total operations per hour under the present conditions. With the reclassification, airlines will be free to operate the schedules they desire without strict boundary. Airlines will still be required to submit proposed schedules for approval from the FAA.

The removal of Newark’s slot controls will leave New York’s John F. Kennedy International Airport (JFK), LaGuardia Airport (LGA), and Washington’s Ronald Reagan National Airport (DCA) as the only remaining slot-controlled facilities in the United States.

The FAA announced its decision back on April 1 of this year. Michael Huerta, FAA administrator, attributed the move to Newark’s improving on-time performance over the past several years: “The significant improvements in on-time performance and delays at Newark allowed us to make these changes,” he said. Huerta believes the removal of slot controls will help facilitate better “access to some of the most in-demand airspace in the country.” No doubt, he is correct on that.

Newark had previously been Level 2 classified until 2008, when the FAA ramped up its classification in attempt to mitigate congestion and delays at the airport. Despite the recent improvements Huerta cites, Newark still ranks among the worst preforming airports on an operational basis.

This begs the question: will the on-time performance of Newark take a dive again? More broadly, what can we expect after the removal of slot restrictions at Newark?

The reclassification is likely to have two primary effects: lower fares and worsening on-time performance.

Capacity Set to Increase, Fares Will Decline


Lifting slot restrictions at Newark will benefit the airport in the form of more competition, increasing total capacity and driving down fares. This is clearly a goal of the FAA’s, with United Airlines presently dominating the market share at the facility.

Without hard, government-imposed limits placed on the airport’s operations, the airlines are likely to ramp up capacity at the airport to a level more closely aligned with which the market demands. The schedule data bears this out so far.

Based on schedules the airlines have published to date, capacity (measured by number of seats) is up 6.61% YOY from the first week of April 2016 to the first week of April 2017, according to data from Diio. This date range was selected since it captures most of the new additions announced by the carriers (although other parameters could be chosen). It also avoids the Easter holiday, which fell in late March during 2016 but falls in late April during 2017, skewing the numbers.

The growth is even greater when measured by available seat miles (ASM’s), since a number of new long-haul international carriers have announced future service to the airport. The data show an increase of 10.09% using ASM’s as the yardstick. This marks extremely aggressive growth on a year-over-year basis, and it is almost if not entirely driven by the lifting of slot restrictions at Newark.

ewr_capacity-growth-yoy

In fact, the airport is set to experience a higher level on operations on each day throughout the week, as shown in the graph below (data from Diio).

ewr_capacity-growth-by-dow

More capacity is likely to apply downward pressure to fares – particularly since much of the new capacity will come from ultra low cost carriers (ULCC’s), which will bring their low fare brands to the market, some for the first time.

For example, Spirit Airlines plans to launch flights to Florida on the first day of the change. It will begin service to Orlando (MCO) and Fort Lauderdale (FLL) on October 30, adding in Myrtle Beach (MYR) service on March 9, 2017. Furthermore, the carrier’s service to all three of these markets will be at least daily (with FLL operating at a whole four daily frequencies by November 10). This marks a relatively significant investment in the airport for Spirit, which tends to operate flights on a less-than-daily (LTD) basis to many destinations.

Allegiant Air, another ULCC, is also entering the market, with LTD flights to Asheville (AVL), Cincinnati (CVG), Knoxville (TYS), and Savannah (SAV) all beginning in mid-November.

ULCC’s are not the only airlines to capitalize on the opportunity to grow at Newark, however. Alaska Airlines has announced new service to Portland (PDX), San Diego (SAN), and San Jose (SJC), on top of its current Seattle route. Southwest Airlines will join Spirit in entering the Fort Lauderdale market, launching service in March. On the transatlantic front, Norwegian, on the political hot seat in recent days, will launch flights to Barcelona (BCN) in June. WOW air will begin flying to its Reykjavik (KEF) hub starting on November 25.

This is just a quick overview of the new service that some of the more notable carriers have in store for Newark. They are all in addition to several new routes, such as Salt Lake City (SLC), San Jose (SJC), and Havana (HAV), announced by the airport’s primary tenant, United Airlines.

More service, particularly by the ULCC entrants at the airport, is excellent news for consumers in the NYC-area. Fares are likely to be on the decline as a result of greater competition. This is particularly true for key leisure markets, such as many of Florida’s larger getaway cities.

The growth which has already been announced is probably not the end of what we can expect over the long-term, either. More carriers are likely to see competitive holes they can exploit on non-stop routes where United Airlines currently holds a monopoly. Of course, long-term growth is not exactly unlimited either, as gate space is still at a premium. But point is, the broader fare benefit experienced by consumers is likely to be even larger over the long-term than on day one.

All of which, of course, is a breath of fresh air for Newark and NYC-area locals, who traditionally pay a hub premium to use United’s fortress hub. Fares have a long way to fall in Newark, and the removal of tight slot restrictions (even though soft ones will still exist) will begin to make indents with regard to fares.

On-Time Performance at Newark Will Suffer


While greater competition will benefit NYC-area travelers in terms of more flight options and lower fares, the increased capacity will not come without any cost at all. Indeed, there is likely to be a tradeoff between lower fares and on-time performance at the airport.

Higher levels of capacity will negatively impact the on-time percentage at the facility. This is particularly true given that most of the new additions are from carriers other than United, which makes perfect schedule coordination more difficult.

Michael Huerta in part attributed the FAA’s decision to relieve slot controls at Newark to upward trends in the airport’s on-time performance. Although he is not incorrect, his statements ignore the fact that Newark remains a perennial bottom-feeder when it comes to getting its flights out on-time. Although trends at the airport have been better of late, it is all relative.

Looking at the past five years (2011 to 2015), Newark ranked dead last among 29 major airports from 2011-2013, according to data from the Department of Transportation (DOT). It has shown some slight improvement over the past two years, finishing twenty-seventh in 2014 and twenty-eighth in 2015. While the upward trend is perhaps encouraging, Newark’s performance clearly still leaves a lot to be desired in the big picture.

ewr_avg-otp

There are many factors which contribute to Newark’s on-time struggles. The NYC-area air space is the most congested in the nation, which poses challenges that are not likely to ever disappear for all three airports in the region (including Newark). Additionally, United Airlines, which holds the lion’s share of the airport’s traffic, had its own internal OTP woes which might have dragged down the airport’s average.

The airline has displayed modest improvements recently, which might give the FAA more confidence in lifting the restrictions.

However, the biggest challenge to adding more capacity at Newark in an OTP-neutral way boils down to one word: runways. Specifically, not enough of them.

Newark features three runways in total, only two of which are long enough to handle aircraft of any type. Furthermore, the shorter runway (11/29) crosses the main set of parallel runways (4R/22L and 4L/22R), limiting its operational capacity. It is not just gate space at the airport which is at a premium; it is also runway space.

The YOY increases in scheduled operations are cause for concern in terms of the impact on OTP, especially for an airport which such limited runway capacity. To get an idea of where the impact will be, we need to look at peak arrival and peak departure periods – not simply the average.

According to schedule data from Diio, the peak arrival period on March 31, 2016 was during the 15:00 hour, with 42 scheduled arrivals. As for departures, there were 43 scheduled during both the 08:00 hour and the 17:00 hour. This level of operations already stretches Newark pretty thinly, and is often the cause of delays.

ewr_2016-ops-per-hour

Schedules for March 30, 2017 (the equivalent Thursday to the previous year) show even busier peak periods. There are 45 arrivals scheduled during the 18:00 hour (an increase from 42), and 49 departures scheduled during the 08:00 hour (up from 43). These are not huge jumps, yes. But it is cause for concern when the busiest periods are getting busier at an airport that is already stretched to the max during these times.

ewr_2017-ops-per-hour

Operating 49 departures per hour will be enough of a challenge at Newark during even the most pristine conditions. It has the potential to do serious damage cascading throughout the day when weather strikes during irregular ops.

Put simply, no one is or should be concerned with Newark’s on-time numbers during the 02:00 hour. It is the 08:00 and 17:00/18:00 banks that are the real bottlenecks of the operation. Given no significant change in runway capacity, one cannot expect to squeeze more operations through the bottleneck without some sort of OTP impact.

Holiday Travel Season Will Provide a Clearer Look at Costs/Benefits


The slot restrictions come off at Newark on October 30. For the competitive reasons mentioned previously, this is something that should excite NYC-area travelers. ULCC’s will inject a much needed breath of fresh air, driving down fares at the airport.

However, it is still important to recognize the tradeoff involved in facilitating this new access. On-time performance is likely to be a cost, despite the many benefits provided by this move. As for whether the benefits outweigh the costs, it depends entirely on who you ask.

The upcoming holiday season will provide an excellent test case for what the airport can truly handle. Slot restrictions will have been removed, and the airlines will have launched some, but not all, of the routes currently on deck. Airlines always ramp up their level of operations during the holidays to accommodate the increased demand, so then we will get a better view of how a very tightly packed schedule at Newark truly unfolds.

October 30 is right around the corner. It will be a new day for Newark and NYC-area fliers, and we look forward to observing the effects of a Newark without slot controls.

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About Author

Alex McIntyre

Alex McIntyre

Texan. Airways Business Analyst. Emory University student, and lifelong AvGeek. Favorite airport and aircraft are: Dallas/Fort Worth International Airport and the Boeing 787. Passionate about all things commercial in the airline business, including route networks and hub operations. I love the window seat.

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1 Comment

  1. Brad Johnson
    Brad Johnson October 28, 08:54

    Another most interesting article Alexander!

    I “babysat” many, many EWR flights at FL (due to flow control) and this will, indeed, be most interesting to watch.

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