How much is a monopoly worth? Plenty, for sure. But it’s no easy matter to precisely quantify its value in any particular situation.
Which makes United’s latest 8-K regulatory filing a matter of some interest. But first, a little background…
With control of around 75 percent of the airport’s flight capacity, United has enjoyed near-monopoly status at Newark airport. But in April, the FAA removed restrictions on additional Newark flights, allowing other carriers to launch new flights as soon as October 30. United will no longer have the option of selling its Newark slots to other airlines at premium prices. And, with the anticipated increase in competition, United’s fortress hub will be considerably less fortress-like.
In its SEC filing, United puts a dollar value on the estimated “non-cash impairment of intangible assets” as follows:
The company has determined that the FAA’s action has impaired the entire value of its Newark slots because the slots will no longer be the mechanism that governs take-off and landing rights. Accordingly, the company expects to record a $412 million special charge ($264 million after income taxes) to write off the intangible asset.
While United doesn’t explain the calculations underlying the write-down, it presumably goes beyond the resale value of its Newark slots to include the loss of pricing power due to increased competition. With more airlines fighting for passengers, United won’t be able to maintain the higher-than-average airfares it has been charging for Newark flights.
To be sure, United will remain the dominant airline at Newark for the foreseeable future. But it will be less of a monopoly, and a better deal for travelers.
In other words, what’s bad for United is good for consumers.
More from SmarterTravel:
- Coming to American AAdvantage: More Credit Card Choices
- How NOT to Use Loyalty Points for PreCheck
- Travel + Leisure Picks the World’s Best Airlines
After 20 years working in the travel industry, and 15 years writing about it, Tim Winship knows a thing or two about travel. Follow him on Twitter @twinship.
We hand-pick everything we recommend and select items through testing and reviews. Some products are sent to us free of charge with no incentive to offer a favorable review. We offer our unbiased opinions and do not accept compensation to review products. All items are in stock and prices are accurate at the time of publication. If you buy something through our links, we may earn a commission.
Related
Top Fares From
Today's Top Travel Deals
Brought to you by ShermansTravel
11-Nt Ireland Tour, Incl. Dublin, Belfast,...
smarTours
vacation $3870+Amsterdam to Copenhagen: Luxe, 18-Night Northern...
Regent Seven Seas Cruises
Ohio: Daily Car Rentals from Cincinnati
85OFF.com