Southwest Hands United Airlines A Free Gift

As the 737 MAX saga continues, Southwest is really feeling the squeeze. Its latest response is to close its Newark station. Talk about a free gift for United…

Southwest has been forced to cancel an escalating number of flights due to the ongoing grounding of the Boeing 737 MAX. The troubled aircraft, which has been grounded since March, has become a compounding problem for Southwest. Southwest has not only had to pull existing 737 MAXs out of service, but has had to scale back a flight schedule that anticipated regular deliveries of the 737 MAX this year. Those too, of course, have been suspended.

Last quarter, Southwest reported a $175 million dent in revenue and blamed that directly on the 737 MAX program. CEO Gary Kelly told investors:

It’s really all about the MAX. It’s the only thing we’re dealing with. Everything else is rock solid.

This is a tactical decision forced by the MAX groundings and the painful cut of 8 percent of our capacity.

With Southwest forced to look for cuts, Newark Liberty International Airport found itself first on the chopping block. Southwest conceded that Newark had “underperformed” expectations, making it the difficult yet logical choice to be cut. Southwest offered up to 20 daily departures from Newark and will now consolidate New York City operations at La Guardia. All staff at Newark will be offered other positions in the company, though it’s a similar problem to when United shut down its JFK station...it’s not easy to work at LGA when you live down the street from EWR.

Southwest will re-assign some aircraft used for Newark to expand its Hawaii operations. Southwest is also delaying the retirement of seven 737-700 aircraft.

A Gift To United Airlines

The move to abandon Newark comes as a free gift to United Airlines, the dominant hub carrier at EWR. Look for fares to rise on former Southwest Newark routes and further validation of United President Scott Kirby’s plan to aggressively challenge any competitor on United’s home turf.

While Southwest leaves open the possibility of returning to Newark, it appears that it sees greener pastures out west and in Hawaii. That makes United a short-term and potentially long-term winner.

CONCLUSION

For Newark passengers, I am sorry to see Southwest abandon Newark. It’s not that Southwest was always the cheapest option. Quite the contrary, United often matched or beat Southwest on price. But that was the point. Absent this competition, look for prices to creep up, especially for last-minute tickets.