United's Move of Trans-Con Service to Newark Is a No-Brainer

NEW YORK ( TheStreet) -- United's ( UAL) shutdown at John F. Kennedy International Airport and move of trans-continental service to Newark seems to benefit everybody, particularly United, raising the question why it didn't happen sooner.

Airline shares rallied Friday, partially as a result of a report by JPMorgan analyst Jamie Baker who wrote that "sentiment remains poor, despite improving headlines." One of the headlines Baker cited involved United's move, which will result in reduced capacity -- Wall Street loves this -- on trans-con routes.

On Friday, United shares gained $1.24 to $53.25, as shares rose at every major U.S. airline except for Spirit (SAVE). Year to date, United shares are down 20%, American (AAL) shares are down 23%, Southwest (LUV) shares are down 10% and Delta (DAL) shares are down 15%.

Over the past three years, airline shares have risen dramatically. The industry is enjoying its highest profits ever: One reason has been that airlines are increasingly consolidating operations at their hubs. In Newark, United operates the most profitable U.S. hub.

So it seems a no-brainer to focus there, but the move is complicated nonetheless. Vacating one of the world's most important airports after seven decades is not an easy choice to make, even if, as United executives told reporters on a June 16 conference call, the airline has been losing money at JFK for seven years.

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