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