Shifting Transcon Flights To Newark Will Improve United’s Profitability
On Tuesday, United Continental Holdings (NYSE:UAL) announced its plans to shift its premium transcontinental flights to San Francisco and Los Angeles, from John F. Kennedy International Airport (JFK) to Newark Liberty International Airport, by October of this year. The Chicago-based airline will sell its JFK slots to Delta in exchange for slots at Newark, subject to regulatory approvals. We figure that United’s decision is well-grounded and will enhance the airline’s profitability going forward. The following reasons support our stance:
- Firstly, United has not made any profits from these routes since the airline launched them seven years back, due to direct competition from JetBlue, American Airlines, and Delta, who also offer premium services on their flights operating from JFK airport.
- Secondly, the airline has been unable to leverage the passenger traffic from Kennedy airport to feed into Newark network. This shift will enable the airline to not only improve its profitability but also expand its existing Newark network, which currently consists of over 500 daily flights.
- Thirdly, flying to Newark would be more convenient for passengers traveling to Manhattan, the financial and cultural center of New York, since the Newark airport is closer and better connected to Manhattan.
- Lastly, United has invested more than $2 billion at the Newark Airport to build a world-class gateway, including new restaurants and luxury lounges to provide premium services to their elite clientele.
Source: Newsroom, United Continental Holdings
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