Announcements by the ultra-low-cost carriers (ULCCs) Allegiant and Wow last week that they will begin operations this fall out of Newark Liberty could portend lower airfares at the United-dominated airport.

“I don’t think this will have a significant impact at first on United’s revenue or profitability,” said travel industry analyst Henry Harteveldt of Atmosphere Research Group. “But this is the first crack in the wall.”

In mid-November, Allegiant will launch flights to Cincinnati; Knoxville, Tenn.; Savannah, Ga.; and Asheville, N.C., from Newark. Later that month, Iceland-based Wow will begin daily service between Newark and Reykjavik.

The moves by both airlines came on the heels of the FAA’s April decision to loosen landing restrictions at Newark. At present, the FAA allows no more than 1,233 daily arrivals and departures from the New Jersey airport, but flights beginning Oct. 30 and after won’t be subject to that limit. Rather, regulators will review those flight applications on a case-by-case basis.

United will clearly be the carrier most affected by low-cost competition at Newark since it currently controls 73% of the airport’s daily takeoff and arrival slots.

Lack of competition is one reason that in the fourth quarter of last year (the most recent for which the Bureau of Transportation Statistics has data), the airport’s average domestic itinerary was $459. That was the highest among the nation’s 15 largest airports.

In the short term, the planned services of Allegiant are likely to have a very targeted impact on fares out of Newark, said Patrick Surry, chief data analyst for Hopper, an app that tracks and analyzes airfares.

However, Surry said, “It has big impacts on the markets where they are competing.”

Since Allegiant flies on a point-to-point model rather than a model that emphasizes connecting routes, its flights shouldn’t affect Newark fares to places other than Cincinnati, Knoxville, Savannah and Asheville.

Wow, conversely, focuses on connecting Europe-bound U.S. passengers from Iceland to its 21 other European destinations. Being a ULCC, the carrier is offering introductory one-ways from Newark to London for as low as $149, and it could have an immediate impact on fares not only at Newark but throughout the New York market, Surry said.

Still, whether or not there will be more pronounced impacts on the cost of Newark flights depends on how much low-cost service is ultimately offered.

In an interview, Wow CEO Skuli Mogensen said he anticipated increasing the frequency of its Newark or greater New York area flights soon.

“We will increase capacity fairly quickly if it works out, and I will be surprised if New York doesn’t work very well for us,” he said.

Harteveldt, meanwhile, said he expects Allegiant to add more Newark service if its first four routes prove to be a success.

But that success is not guaranteed, especially in light of the fact that Allegiant had the lowest on-time rate of any low-cost North American airline for each of the first five months of this year according to the website Flightstats.

“New Yorkers don’t tolerate sloppiness,” Harteveldt said. “Allegiant can’t expect to be a success if their flights are delayed. They need to be reliable, and they need to be punctual.”

Another wild card at Newark is whether ULCCs Spirit and Frontier will also enter the market. So far, neither airline is saying.

Enough low-cost competition would impact United, Harteveldt said.

“With ULCCs it isn’t where things start,” he said. “It is where they finish.”


From Our Partners

2020 Australia Webinar
Australia is open for business
Register Now
Australia Is Open for Business
Australia Is Open for Business
Read More
2020 Events 365
Discover Unforgettable Live Events with Events 365
Register Now

JDS Travel News JDS Viewpoints JDS Africa/MI