United Airlines has threatened to abandon its Newark hub if New Jersey lawmakers follow through on a proposed tax increase at Liberty International Airport that would only affect United.
Currently, New Jersey only taxes the fuel on a plane burned during taxi and takeoff. Lawmakers are now considering taxing all fuel…but only for United Airlines.
United is New Jersey’s largest airline, carrying 28 million passengers per year. No other airline carries more than two million. United has invested more than $400 million in Newark the last two years and more than $2 billion since 2000. The new tax would implicate only airlines which carry more than eight million passengers per year.
Jill Kaplan, United’s President for New York and New Jersey, warned lawmakers of the consequences of increased taxes:
So we have choices as to where we will grow. And if this additional and discriminatory tax scheme becomes law, it is my profound concern that this will impact our ability and stunt our ability to invest in future investments at Newark and in turn New Jersey.
She warned that if this tax is imposed, “United might have to consider transferring the bulk of its operations to one of the other hubs.”
She also claimed the tax increase would be illegal, noting that fuel taxes could only be used for aviation purposes. Lawmakers want to use the increased tax revenue to fund an extension of the PATH commuter train to Newark Airport.
I’m not so sure about that argument. New Jersey is one of the few states with a fuel tax exemption (limiting it to taxi and takeoffs only). Removing it would place the Garden State in a similar position to United’s other hubs. Furthermore, the definition of what defines “aviation spending” has historically been broad. Therefore, the PATH extension to the airport, which certainly has at least a tangential effect on aviation, would probably clear any legal challenge. That doesn’t speak to the wisdom of such a tax increase.
CONCLUSION
I’m trying remain unbiased here. Both sides make valid points. I am sympathetic to United’s point that it is essentially being punished for its investment in New Jersey, which is substantial. And whether out of spite or actual financial advantage, Newark will be hurt if this tax is imposed. Less routes hurts consumers, employees, and the state’s tax base. On the other hand, infrastructure like public transport systems are in great need of upgrade, refurbishment, and expansion. Those who benefit from such systems should pay for them. Presumably making access to EWR easier from New York would increase traffic and help airport employees.
What do you think about the new tax? Fair or not? Wise or not?
I doubt they’ll abandon the Newark hub, but they will probably shift flying around such as moving leisure Europe routes to IAD. If the tax comes to fruition it’ll certainly impact where routes are added/removed over the next few years as everything in EWR will be slightly less profitable
Move the route to IAD and pay the taxes there?
United is lying. They’re not going anywhere.
I agree. Where would they move their east coast hub too? I doubt JFK has much room for growth. LGA is a mightmare. Boston? DAL and JBU have it pretty locked down. Dulles? Maybe? But what about the local market?
Next thing NJ will do is not let them fuel their own planes like they do cars 🙂
United has exactly zero places to go to. If they leave the NY/NJ hub, *A will most surely fall apart; none of the foreign *A airlines would want to partner with an airline that can’t feed them passengers into one of the most important markets in the world. United should have kept a presence at JFK. This is what happens when you let ambulance-chasers and bean-counters run an airline: zero imagination, zero competence, zero execution-ability.
+1
Back to Cleveland they go?
The PATH extension to EWR won’t really help much given how slow the PATH train is compared to NJTransit when travelling to/from NYC.
Jill just sent an e-mail titled “What’s new in NY and NJ” to a bunch of us NYC based fliers — presumably to backtrack on these comments.
United…you are welcome to relocate your hub down to PHL and give AA a run for it’s $$$!
We will welcome you with open arms and move Delta out of Terminal D and over to E so you have an entire terminal to use…there’s even a United Club already there too!
If it is only for United, New Jersey is definitely cutting off its nose. Since Continetal was caught up in the Top Three blob that has made domestic flying miserable, and international service a joke, more and more people are caught in a pissing contest. Yes, infrastructure need to be built. Simple solution? An increased facility use tax on all departing passengers, increased sales taxes, increased gate fees on airlines, increased taxi minimums applied to Uber and Lyfts gypsy cabs as well.
” I am sympathetic to United’s point that it is essentially being punished for its investment in New Jersey, which is substantial. ”
That is no less true for every other company (and family) that made the decision to invest or put down roots in New Jersey . . . in hindsight I suspect that there are very few who don’t regret that decision (and this is even more true for those which invested in New York where individuals are paying well over 50% of their income in taxes).
Not only are most US airports dreadful EWR is one of the worst, come to think of it EWR and UA are about as good as each other. Air space over the NJ/NY area is overcrowded as well. Long ago I learned not to fly via EWR, not fly UA even if the alternative means a drive.
Nothing will happen, because most likely the NJ legislature will back down or will walk back any changes down the line. Nobody in NJ wants to be tied to jeopardizing “average Joe” jobs, of which United (being the bulk of the airport) is paying for, albeit indirectly.
My guess is that this is a ploy to have United pick up more of the bill at the airport. What can you do in a state that has strained finances because of entitlement expenditures that no politician wants to face head on?
Excellent comment ADP. NJ pols are as inept as NY pols. Corruption and ineptitude are the foundation of the Democratic machine that runs both states. If United is smart, threaten to leave and that will change the tone of the threats in Trenton.
Any tax increase should be well considered before moving forward. Public transportation has a bad track record in terms of efficient operations, reliability, and cost containment.
United sucks anyway. Big rip off cheap airline to there passengers. Please leave. We would welcome another airline that cares about the passengers that keep airlines in business.
Amen. I concur!
Actually, United DOES have an alternate International gateway…Dulles. All of the International route authority United needs, it got from 3 acquisitions of Pan Am routes, & all are easily transferable from EWR to IAD. In addition, IAD does not have a fraction of the ATC Flow Control issues that EWR does. United can move a bulk of its flying down to Virginia, while keeping a much smaller operation in EWR. UA won’t leave NJ, but it can easily downsize…and that is not good for the state of New Jersey.
Thanks for sharing the news Matthew. I don’t thin United would abandon EWR because they have already lost JFK and United opened the Polaris lounge.
But EWR really suck as an international airport. Everytime I fly there I have to wait for a gate to open up or the flight is too big to the gate so they divert you to a different gate and we have run to catch the connection. Not to mention long TSA precheck lines get crossed with regular lines. First class security gets mixed with precheck and regular.
It’s a Zoo!!!
My problem is the unfair way the tax is being applied. By only applying it to an arbitrary threshold which hits United but no other carrier at Newark it’s fundamentally unfair. This results in United being at a cost disadvantage automatically on any route fromNewark where they have competition.
If EWR wants to tax all fuel for all airlines that’s one thing. Though of course how NY does it becomes an interesting question. But when they tax only the home town hub carrier just because they can that’s wrong.
The tax is discriminatory and very unfair to United. New Jersey will stand to loose if EWR gets less air traffic.
The bloated, overly zealous money grabbing State of New Jersey at its finest. Once again, the mindless State legislature in a race to the bottom. United should start discussing transferring operations and invite suitors to submit bids for its business. New Jersey State government is the established index of organized abuse and corruption. It’s new Governor the shining light of ineptness and self righteousness. United has options- the State has none.
Not only would the PATH train extension likely qualify as meeting the “broad” definition of “aviation spending”, unless the laws/definitions have changed since the JFK Airport AirTrain was planned/built approximately 20 years ago, the template that New Jersey would use for funding actually resembles that which was used to construct the AirTrain wherein legally speaking, the route used was either via existing JFK Airport property (the A train NYC Subway link), or by creating/carving out a corridor from the airport grounds down the middle of the Van Wyck Expressway for the elevated portion that extends to/from the Long Island Railroad Jamaica station/transportation hub, and having it deemed as if airport property, such that technically speaking, once one steps into the AirTrain terminus, and is aboard the AirTrain, they’re already within the airport boundry.
This was done to allow for use of Passenger Facility Charges (PFCs) to fund buidling of the AirTrain, since, of course, trying to get other major transportation projects built in and around NYC is otherwise next to impossible due to political infighting, exorbitant price tags, or both.
So, again, unless, the laws defining “aviation” or “airport” related projects have changed, the formula envisioned to extend the PATH train already exists, and has survived court challenges.
What is curious, however, the targeted nature towards United. On that front, United would be correct to challenge this attempt to shift the cost to it, while exempting other airlines.
To me, and since all airlines would benefit from a one-seat, direct link between midtown & downtown Manhattan, plus other points on the PATH network in New Jersey (Hoboken, Jersey City, Newport, Exchange Place, Journal Square & Newark), this tax should either be applied uniformly to all – or none.
Singling out United (or any airline) is patently unfair.
Addendum:
When referencing “exorbitant price tags” for major transportation projects in my comments above, what is meant is that the high cost would require states to fund the projects via tax exempt bonds for two states that are already leveraged to the hilt for the borrowing, be it for general obligation bonds, transportation agency bonds (especially the NY State – NOT NY City – controlled Metropolitan Transportation Agency, or MTA), or special purpose economic development agency financed projects which is now the primary financing tool used by airlines and/or the other terminal development management companies that have emerged over the past 25 or so years (for example, Terminal One Group Association [AF, JL, KE, LH]; JFK IAT/Terminal Four which is in part owned by Amsterdam’s Schiphol Airport; or most recently,
LaGauardia Airport’s Gateway Partners for its Central Terminal/Terminal B replacement now under construction).
By having projects developed under the cover of airport/aviation related instead of state/local administration, apart from the governor’s of both New York & New Jersey having greater control over those projects politically, it also allows for those projects to be deemed as airport development, and therefore not just opens up financing from PFCs or other Federal funding, it also allows for the twin benefits of the far better credit ratings that the Port Authority already has given its ability to raise tolls and other fees without as much risk to elected officials politically as otherwise faced when fares and tolls are raised for buses, trains, and locally controlled highways, bridges, and tunnels, to be used for selling tax exempt bonds to the public, while also shielding either states’ credit ratings from being downgraded, that would then result in higher interest rates to compensate for the higher underlying risk.
I agree with the work who sympathize with both sides. However, rather than impose a tax on United, who not all them directly to donate toward PATH refurbishing for a tax wire off? That way it’s voluntary, philanthropical and both sides win.
Hope UA leaves from this horrible airport
Let’s talk about NJ in general where property taxes are the highest in the country while second place is almost 50 percent less in taxes. Plus we are about to get hit with another gas tax. Why the fuck am I living here again?
Good question.
the 2nd place (IL) is only 0.08% behind NJ. you’re looking at the median price of homes in NJ vs IL, not the property tax level.
As a pilot who wouldn’t mind flying for United, I’m all for leaving Newark. United can have its regionals fly them to other nearby airports thereby serving the area without the BS of NJ taxes
New Jersey elected a Democrat governor.
No way United goes anywhere. They have spent way too much time and money developing EWR into a fortress hub. Reducing service at Newark would mean ceding the largest and most premium market in the country to Delta, and also allowing AA some breathing room to grow their JFK hub once again. NJ has them over a barrel and each party knows it.
I don’t feel it’s a bad thing to get the airlines to chip in more to cover the cost of the PATH extension that will definitely benefit them – United more than anyone else. A one-train ride from lower manhattan to EWR would be a massive selling point for United’s international service. I suspect there is also probably more to this picture than meets the eye – probably a background of quiet discussions between the airline and the state on finding the PATH project that turned acrimonious.
SCREW THE LAWMAKERS….IF I WERE UNITED I TAKE MY JETS ELSE WHERE ALSO. CITIZENS PAY TOO MUCH TAXES SO USE THAT MONEY…….IF THE FRIENDLY SKIES PULL OUT THEN NEW JERSEY LAW MAKERS WILL ALL LOOSE THEIR JOBS..SCREW THEM.
Providing air travel infrastructure is government’s responsibility – it benefits everyone in the State (not to mention businesses in NYC, CT, etc). Seems most of the cost should come from general funds, with perhaps some additional contribution from a user fee in the form of additional departure tax (look at current LHR departure levies!). Increasing the fuel tax, only for your biggest tenant, is wrong-headed.
https://www.wsj.com/articles/faa-sides-with-united-in-newark-airport-fee-dispute-1542752859
I live on the UPPER, EAST-SIDE/CARNEGIE HILL neighborhood, and I AM SICK of Untied Airlines telling me how close Noo-Ark is. IT ISN’T. And when you finally arrive there, the lines at security are HORRENDOUS.
Then you have to traipse past hundreds of overpriced restaurants to get to your distant gate because those morons have removed the moving sidewalks and replaced them with MORE restaurants!!
Which if you can fit in those ridiculous bolted-to-the-floor stools, you’ll have an annoying iPad hitting you in your face.
Not enough toilets. Too many crowds in the Untied “Clubs”.
I’VE HAD IT WITH THAT DAMMED PLACE IN JOIZEY.
I’m a New Yorker and I’M STAYING IN NEW YORK!!!!
THE HELL WITH JOIZEY!!!!
I heard from some of my bosses that during a meeting a few weeks back that United was planning on ramping up their ops at Dulles. This might be due to the tourist season being around the corner, but if that was the case it would be business as usual. I believe this might be the shift from EWR to IAD this article was mentioning.
IAD isn’t a bad airport to do it with either; it’s nearly twice as big as EWR, has 3 parallel runways coupled with less congested airspace, has a decent amount of gates to perhaps accompany the change or has the operations where United can stick some flights here and there outside of their usual banks, and the airport still has plans for expanding (at least 2 additional midfield terminals and a 5th runway parallel to 12/30). This increase might spur the future development to happen sooner.