By Rajesh Kumar Singh
CHICAGO (Reuters) -United Airlines is facing a financial hit and potential long-term reputational harm as flight delays and cancellations pile up due to ongoing disruptions at Newark airport - one of its largest hubs and among the busiest in the country.
A facility responsible for guiding air traffic in and out of Newark Liberty International Airport, located about 9 miles (14.5 km) from Manhattan, has suffered three communications outages in two weeks, including a 90-second radar and telecommunications blackout on Friday.
The Trump administration said on Monday it was convening an emergency task force to prevent additional telecom outages at Newark, the second-largest airport in the New York metropolitan area after John F. Kennedy International Airport (JFK).
The issues at Newark, where nearly 70% of the flights are operated by United, have been far more damaging for the Chicago-based airline than key rivals like Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL), which only have about a 5% and 4% share of traffic at the airport respectively.
Since air traffic control staffing shortages and airspace restrictions began hitting hard on April 26, more than 9,000 United domestic and international flights - about 26% of those scheduled across its network - have been delayed, according to tracking site FlightAware. United has also canceled about 2% of its flights.
Company officials ascribe most of the delays and cancellations to the issues at Newark, which they say are causing a ripple effect across the airline’s network.
Passenger frustration is growing.
Last week, many travelers were alarmed by the possibility that pilots could face difficulties landing planes safely. Some passengers vowed never to fly through Newark or on United again.
Denise Spillman, a 65-year-old resident of Louisville, Kentucky, said United is "off" her list for future travel after her return flight from Scotland was delayed amid Newark’s air traffic chaos.
In an email to customers on Monday, United CEO Scott Kirby (NYSE:KEX) assured them that "all the flights in and out of EWR (Newark) are absolutely safe."
But for the airline, the timing of the chaos is particularly damaging. The summer travel season, typically the industry’s most profitable period, is fast approaching. Newark is United’s key gateway for its lucrative transatlantic routes, whereas Delta and American Airlines use New York’s JFK airport.
United has cut about 10% of its daily Newark flights and waived change fees and fare differences for customers affected by the delays and cancellations.
Speaking on CBS’ Face the Nation on Sunday, Kirby said the disruptions would have a financial impact on the company, though he did not provide specific figures. Former United CEO Oscar Munoz was more direct, telling Reuters the fallout would likely be "significant".
UNITED MISSTEP
The blow comes as the airline industry grapples with slowing travel demand following the economic fallout of President Donald Trump’s trade war, which has undercut revenue forecasts across the sector.
Last month, United forecast lower-than-expected profit for the second quarter and warned of downside risks to its full-year outlook if the U.S. economy slipped into a recession.
The Federal Aviation Administration (FAA) said on Monday it would propose flight cuts at Newark to ease the stress.
Constraints at the airport have already forced United to reduce its daily departures to 295, down 33% from pre-pandemic levels. In a bid to minimize the revenue hit from reduced flights, Kirby said the company is now using bigger jets.
Industry officials and analysts said United had put itself in a bind as a result of its move to consolidate operations at Newark and exit JFK in 2016.
Munoz, who served as the company’s CEO from 2015 to 2020 before handing over the reins to Kirby, said the strategy was "short-sighted" and "arguably one of the single-worst mistakes" made by the airline.
Kirby has also called that decision a mistake. In March, he said that United would like to have a presence at JFK.
United returned to the New York airport in 2021, using temporary takeoff and landing slots made available during the pandemic. But the company failed to secure enough slots to be competitive, which led it to stop operating at the airport a year later.
The airline is negotiating a partnership with New York-based JetBlue Airways (NASDAQ:JBLU), Reuters reported last month. The deal is widely expected to pave the way for United to regain a foothold at the airport.
"Getting back into JFK for a company like United would be incredibly beneficial," Munoz said.