Aug. 27 (Bloomberg) -- Southwest Airlines Co. will add a second New York City-area airport, New Jersey’s Newark, under an agreement to lease space for 18 daily round trips from merger partners Continental Airlines Inc. and United Airlines.
The U.S. Justice Department said today’s move settled its “principal competition concerns” in the Continental-United tie-up and closed its review. The merger still needs shareholder approval and U.S. Transportation Department clearance.
Starting service at Continental’s Newark hub lets Dallas-based Southwest achieve its goal of expanding in New York after failing to obtain room for more than eight daily flights at New York’s LaGuardia airport. Southwest is the biggest discount carrier.
“This gives Southwest a foothold on both sides of the Hudson River,” said Bob Mann, a former American Airlines executive who runs consultant R.W. Mann & Co. in Port Washington, New York. “Those are both high-revenue, high-spending markets, and business in New York fans out in all directions.”
Flights would start in March, with a full schedule in place by June, according to a statement today from Southwest. The plan is contingent on Continental and United closing their merger by Nov. 30. The carriers said today they expect to do so by Oct. 1.
Southwest said it hasn’t determined what cities it will serve from Newark or the timing of those routes.
Mann said the 18 round trips give Southwest a “critical mass” at Newark, and said the carrier’s low-fare strategy will be a “price depressant” in markets where the airline overlaps with competitors.
Continental and its regional partners account for almost 64 percent of passengers at Newark. Continental and United now operate 442 daily round trips into and out of Newark, and said they plan to continue service to all destinations.
The lease of flight slots to Southwest resolves the Justice Department’s “principal competition concerns and will likely significantly benefit consumers on overlap routes as well as many other routes,” the agency said in its statement.
Continental and Chicago-based United announced on May 3 that the two carriers would merge. The combined airline will be the world’s biggest, surpassing Delta Air Lines Inc.
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