Earlier today, I wrote about United’s ultimatum at New York JFK: give us more slots or we will pull out. It’s a gutsy demand and not entirely reasonable, but represents a shrewd chess move with little downside.
Analysis – United Airlines Is Shrewd And Unreasonable In Latest JFK Demand
How United Reached This Point
First, let’s trace back how United Airlines got here. Less than 20 years ago, New York JFK was a bustling focus city for United. In addition to frequent transcontinental flights, United also offered service to London, Tokyo, and Washington Dulles. But with disgraced ex-CEO Jeff Smisek at the helm, the carrier pulled out of JFK completely in 2015, leasing its slots to Delta in an exchange for Newark (EWR) slots that ultimately backfired for United.
JFK is an important market for New York City and West Coast residents and the unintended consequences of leaving JFK were the loss of corporate business in other markets since many travelers are averse to flying into Newark (EWR).
Very early in his tenure as United’s President, Scott Kirby made clear he wanted United to return to JFK. The pandemic finally made that possible, though United was only granted sufficient slots for two flights per day between its west coast hubs, San Francisco and Los Angeles, and JFK.
The Current Problem At JFK
Understandably, the limited flight footprint dampened the appeal of service at JFK. Indeed, the limited flight schedule did not produce the sort of premium demand United was hoping for, leading the carrier to pull its premium-heavy Boeing 767-300 jets on the route for its aging Boeing 757-200 jets, representing a sizable premium capacity reduction (though overall capacity increase due to more economy class seats).
Leveraging The American Airlines – JetBlue Northeast Alliance
Now United is strategically trying to use anti-trust concerns over the JetBlue-American Airlines partnership to gain free slots at JFK. Make no mistake, the timing of this salvo to the FAA is an attempt to position United to benefit from any slot divestment requirements that would likely be part of a deal between the U.S. Department of Transportation (DOT) and JetBlue-American in order for their Northeast Alliance to proceed.
Of course, United is not so explicit in its intentions. Instead, United argues that airport improvements at JFK over the last decade should mean more takeoffs and landings are possible.
The problem (and ask anyone who flies out of JFK) is that the airport is still heavily congested. While the runway work may have helped to mitigate the congestion, there is still extreme congestion in the afternoon hours that routinely leads to waiting times of 30-40 minutes to takeoff. United rightly points out that it does more with less at Newark (three runways instead of two), but United’s operational performance at Newark has been poor this summer and the case of Newark is hardly a compelling argument for more slots at JFK.
United’s Cozy Relationship With Biden Administration
Yet, United is right to try. Over the last two years, it has courted favor with the Biden Administration through its early vaccine mandate, carbon capture initiatives, COVID-19 vaccine and baby formula deliveries, repatriation flights for Afghan refugees, and investment in electric aircraft and energy-efficient supersonic planes.
This is where, as the old adage goes, one hand washes the other. While granting any sort of favoritism to United would be denied, United has laid the foundations for this moment over the last several years. Its cultivation of key relationships with the present administration makes it at least possible that FAA authorities, even while insisting this is for competitive reasons, give in to United’s demands.
Slot Waiver Restrictions Set To Expire
There’s another issue at play at JFK: slot waiver restrictions. Over the summer, the FAA extended slot waiver restrictions to carriers at JFK. This includes waivers for international operations only and is set to expire on October 29, 2022, which will mark the early stages of the winter schedule for the northern hemisphere, generally a period of reduced demand between the U.S. and Europe. Delta was a huge proponent of this waiver, blame staffing issues due to COVID-19 for its inability to operate a full schedule and the FAA has gone along. Now United is using this as a wedge to argue that allowing it to add more flights will be better for consumers than a further extension of the slot waiver. Ironically, if the slot waiver is not extended, United will lose its current slots at the end of October.
The Ghost Of US Airways
Finally, Kirby should realize that those who play with fire often end up getting burned. Let us not forget that it was Kirby who orchestrated the great slot swap between US Airways and Delta in 2011, which gave Delta an unprecedented foot in New York LaGuardia (LGA) in exchange for more slots at Washington National (DCA). In retrospect, the move was a huge blunder.
Here, though, United’s flights are not performing to expectations at JFK and the threat to suspend service provides a nice cover for bailing on unprofitable routes. Even so, multiple sources within United tell Live and Let’s Fly that JFK remains a huge priority for United and that if given the opportunity, it would launch up to 20 daily flights between the West Coast and JFK.
United’s latest chess move at JFK is unreasonable in that United willingly walked away from the airport in 2017. Even so, the latest demand provides strategic cover for canceling an unprofitable route and if it does work, United is prepared to quickly ramp up services at JFK.
Do you think United will gain more slots at JFK?