United's On-Time at Newark Beats Average Despite DOJ Claim, Analyst Says

Performance for United Airlines' on-time arrivals at Newark Airport is surprisingly good despite the DOJ's claim of bad service, an analyst says.
By Ted Reed ,

A veteran airline analyst said the Department of Justice may be overstating the case against United Airlines (UAL) - Get Report at Newark Airport.

A week ago, the DOJ's antitrust division sued to keep United from leasing two dozen Newark slots from Delta. United currently controls 73% of the 1,233 slots at Newark; the June transaction would marginally increase its share.

In prepared remarks delivered during a media conference call, Bill Baer, assistant attorney general and head of the antitrust division, declared, "We know that airfares at Newark are among the highest in the country while United's service at Newark ranks among the worst."

However, in terms of on-time arrivals, perhaps the most critical service component, "United outperformed Newark's average on-time rate 8 out of 9 months," wrote Deutsche Bank analyst Mike Linenberg, in a note issued Friday.

Linenberg reviewed Transportation Department statistics measuring arrivals within 15 minutes of schedule for the nine most recent available months, which ended in September. Not only was United's on-time arrival rate above average during eight of the nine most recent months, but also, even including United Express service, United's consolidated on-time record beats the average in six of the nine months.

United's on-time arrivals rate at Newark exceeded Southwest's rate of on-time arrivals in nine out of nine months and exceeded JetBlue arrivals in six out of nine months.

Moreover, United's mainline operations outperformed the combined average on-time rate for JFK and LaGuardia airports in seven out of nine months with an average outperformance of five percentage points. Including United Express, United outperformed the average in six out of nine months with an average on-time outperformance of 3.3 points.


As for fares, Baer said United "has long been able to charge a so-called 'Newark premium,' on average charging more for its Newark service than for comparable service out of other New York airports."

Linenberg said. "The reason New York/Newark airfares are among the highest in the country is due to the strength of the traffic mix.

"Not surprisingly, the New York airports enjoy a disproportionately larger share of business and high-end leisure travel than other U.S. markets and the majority of the traffic is local (rather than connecting traffic which tends to be lower yield)," he said.

A final point, Linenberg said, is that the DOJ lawsuit notes that on some days United does not use all of its Newark slots -- as many as 82 slots a day are not used.

In fact, United does not use every slot every day because demand is heavier on some days than on others. But Linenberg noted that while United does not use 9% of its slots, Southwest does not use 11% of its slots and Virgin America does not use 25% of its slots, partially because some are leased to another airline, he said..

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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