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U.S. to award Newark flights to low-cost carrier to spur competition

The Biden administration will announce on Thursday it plans to award 16 slots for flights at Newark International airport in New Jersey to a low-cost carrier to spur competition at the busy northeast U.S. airport, documents seen by Reuters show.

The U.S. Justice Department had urged transportation officials to decline to retire the 16 Newark slots and instead make them available in order to spur competition, according to a source familiar with the matter.

Separately, the Federal Aviation Administration will announce it is extending temporary waivers of minimum flight requirements at some major U.S. airports through late March 2022 for international operations because of the coronavirus pandemic, sources said. Airlines can lose their slots at congested airports if they do not use them at least 80% of the time.

The FAA is proposing extending temporary waivers of the requirements at New York’s JFK and LaGuardia airports and Ronald Reagan Washington National Airport that were to expire in late October, a document seen by Reuters shows.

United, which has a hub at Newark, flies about 65% of all Newark flights. Newark was the 15th-busiest U.S. airport in 2020 by total passengers.

“Opening up more slots at Newark to lower cost carriers will provide air travelers with more choices and lower prices,” said Deputy Transportation Secretary Polly Trottenberg.

In a joint notice seen by Reuters, the Transportation Department and FAA said without the reassignment of the slots to a low-cost carrier “it is highly unlikely that there will be any significant reduction in fares.”

The notice added that the agencies believe “the benefits of lower fares significantly outweigh the impacts of additional delays.”

The administration did not identify the carrier it plans to award the slots. It will take public comments on its proposed decision before making it final.

A U.S. appeals court in May vacated an FAA decision from October 2019 to retire 36 slots at Newark that had been held by Southwest Airlines.

Southwest had acquired the slots in 2010 as a condition of the government’s approval of United’s merger with Continental Airlines. Southwest subsequently said in July 2019 that it would pull out of Newark in favor of LaGuardia, and Spirit, a low-cost carrier, asked for 16 of the most desirable slots.

United and Spirit did not immediately comment. Shares of Spirit Airlines rose on Thursday, trading up 0.8%, while United added 1.6%.

The notice cited President Joe Biden’s sweeping order signed in July to spur competition in the U.S. economy. The FAA estimates that awarding

the 16 slots formerly held by Southwest would increase delays at Newark by 5.9%, or by an average of 1.2 minutes per operation throughout the day.

The FAA’s separate Covid-19 waiver extension will grant U.S. airlines more leeway not to fly some flights as Covid-19 continues to impact demand.

At four U.S. airports where the FAA has a formal schedule-review process - Chicago O’Hare, Los Angeles, San Francisco and Newark - the agency proposes to extend credits to airlines for some international flights canceled due to the coronavirus as though those flights were operated.

“COVID-19 continues to present a highly unusual and unpredictable condition for international operations that is beyond the control of carriers,” the FAA document said.

This article originally appeared on CNBC

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