AIRLINE COMPETITION

NEWARK LIBERTY INTERNATIONAL AIRPORT

AIRLINE

COMPETITION

PLAN UPDATE

Submitted to:

The Federal Aviation Administration

As required by:

The Wendell H. Ford Aviation Investment

& Reform Act for the 21st Century

Pub. L. 106-181, Section 155

February 1, 2013

Properties & Commercial Development, New Jersey Airports

Newark Liberty International Airport

1 Conrad Road – Building One, Newark, NJ 07114

Availability of Gates and Related Facilities

A. Carriers Serving the Airport

In 2012, EWR accommodated approximately 34 million passengers throughout three terminal complexes

designated as Terminals A, B and C with a total of 109 aircraft gates.

Below is a table of the airlines serving EWR as of January 2013 and the corresponding terminals of

operation.

Table 1. Airlines Serving EWR

Availability of Gates and Related Facilities

AIRLINE ARRIVING TERMINAL DEPARTING TERMINAL

Air Canada A A

Air India B B

Alaska Airlines B B

Alitalia B B

American A A

American Eagle A A

British Airways B B

Delta B B

El Al B B

Jet Airways B B

Jet Blue A A

Lufthansa B B

Open Skies B B

Porter Airlines B B

SAS B B

Singapore Airlines B B

Southwest* A A

Swiss B B

TAP Portugal B B

United B/C C

United Express A/C A/C

US Airways A A

US Airways Express A A

Virgin Atlantic B B

WestJet A A

*New since last submittal.

Availability of Gates and Related Facilities

B. Process for Accommodating New Service

Despite limitations experienced by the slot allocation system at EWR, the Port Authority continues to reach

different markets by promoting its services, including its proximity to Manhattan and other cities in the

northeast via AirTrain and access to the Northeast Corridor (NEC), modernized terminals, and an array of

retail and food services providing for a more pleasurable travel experience.

Since the last update, Port Authority staff has marketed EWR to different airlines providing them a site visit

and area demographics, gate availability, and rates and charges. Hainan Airlines (Beijing),Turkish

Airlines(Istanbul),BH Air(Sophia), Aeromexico (Mexico City), Austrian Airlines (Vienna), Cathay Pacific

(Hong Kong), Transaero Airlines (Moscow), and Interjet Airlines (Mexico City) are just a few airlines that

were thought to be possible prospects for operating at the airport. While some chose not to commence

service at EWR for reasons beyond the control of the airport, Southwest airlines did commence service at

EWR between March 2011 and January 2013. On April 2, 2013, Virgin America will commence service at

EWR.

The process for accommodating new entrants has not changed. Port Authority staff regularly maintains the

New Entrant Guidelines to reflect updated airport information. A copy of the New Entrant Guidelines is

included in Attachment B.

Port Authority staff continues to ensure that new entrants who are requesting gates for service are

accommodated whether it is through use of the Common Use Gates or through an arrangement with an

incumbent airline. While Port Authority approval is needed for the latter arrangement, however the

negotiations on the terms of the gate occupancy are left to the new entrant and incumbent airline. If the

airline is not able to accommodate the new entrant, it is required to provide the new entrant with its decision

in writing. When an agreement cannot be reached, the Port Authority uses its influence to negotiate on

behalf of the requesting airline to locate suitable gate availability.

C. Number of Gates Now Available at Airport/Gate Allocations

As of January 1, 2013 EWR consists of 109 gates, 87 are exclusively leased and 22 are common use.

There are seven domestic common use gates in Terminal A; four are located in Satellite 2, two are located

in Satellite 3, and one (Gate 18) in Satellite 1. The four gates in Satellite 2 are highly utilized by United and

JetBlue, and offer limited availability because their high utilization. Of the 87 exclusively leased gates,

Southwest operates on three Terminal A Satellite 1 gates. Effective January 1, 2013 Virgin America is

leasing one gate in Satellite 3 Terminal A.

There are fifteen international common use gates in Terminal B; all offering partial availability depending on

desired arrival and departure times. The remaining 87 gates span across the airport in Terminals A, B and

C and are exclusively leased gates.

Availability of Gates and Related Facilities

D. Gate Utilization

EWR gate utilization is primarily tracked by gathering scheduled departure/arrival data from an online

Official Airline Guide (OAG) schedule database. Data is gathered monthly to show airline turns per gate,

per day. A turnaround operation is a contiguous flight arrival and departure of an aircraft at a gate position

involving both the unloading and loading of arriving and departing passengers.

Table 2 below shows the domestic common use airlines, as well as the master lease airlines, and their

gates and turns per gate for each month during 2012. Average year-end 2012 numbers are shown as well

as the average 2011 numbers. Terminal B international airlines and gates are not included, as the nature of

their agreements with the Port Authority are such that, minimum daily gate operations (turns per gate) are

not required. Numbers for airlines such as Delta and US Airways also include any handled or subleased

airlines on those gates. From 2011 to 2012 the majority of airlines did increase their average turns per day

per gate.

Table 2. 2012 EWR Scheduled Gate Utilization Expressed in Daily Average Turns Per Gate

All 1999 Terminal A Reallocation Airlines are required at least a 3 turn/day/gate operation on Master Lease Gates. American was not part of

the reallocation. Delta/Northwest, Southwest,

Common Use Airlines and operations in Terminal C do not have this requirement.

*US Airways operations include those of Frontier Airlines/Republic.

**Terminal B operations include those on the 9 Delta Gates. The 15 B-2/B-3 International Gates and operations are not inclued.

1. JetBlue operates on 3 Terminal A Common Use Gates, operations include seasonal once daily flights by WestJet.

2. United Express operates on 2 Terminal A Common Use Gates with split loading bridges.

3. Delta operations include departures of Air France, Alitalia, and Swiss (PrivatAir).

Turns/Day/Gate

Terminal A Annual 2011

Satellite A-1 Jan-12

Feb-12

Mar-12

Apr-12

May-12 Jun-12

Jul-12

Aug-12

Sep-12

Oct-12 Nov-12

Dec-12

Average Average

Air Canada 5.5 5.6 5.5 5.6 5.2 5.1 5.2 5.2 5.1 5.2 5.5 5.5 5.3 5.4

Southwest 5.9 5.9 5.8 5.8 5.8 5.6 5.6 5.6 5.6 5.7 5.6 5.6 5.7 3.8

United 4.1 3.9 9.6 7.7 6.9 8.6 9.3 9.7 7.8 7.6 9.6 7.6 7.7 4.0

Satellite A-2

United Express 15.2 15.8 17.2 18.2 18.2 18.1 17.3 21.3 22.9 24.2 22.4 21.6 19.4 16.3

Satellite A-3

American 2.7 2.7 2.9 2.8 2.8 2.9 2.8 2.9 2.8 2.8 2.8 2.7 2.8 2.7

USAirways* 4.8 4.9 4.9 4.5 4.5 4.7 4.7 4.6 4.5 4.6 4.5 4.5 4.6 4.8

A Common Use Gates

JetBlue1 5.8 5.9 5.9 6.0 5.3 5.5 5.6 5.6 5.0 5.1 6.1 6.2 5.7 4.9

United Express2 15.2 15.8 17.2 18.2 18.2 18.1 17.3 21.3 22.9 24.2 22.4 21.6 19.4 16.3

Terminal B**

Satellite B-1

Delta3 3.1 3.1 3.3 3.2 3.1 3.3 3.2 3.3 3.0 3.1 2.9 2.6 3.1 3.5

Terminal C

United 4.1 4.2 4.4 4.6 4.3 4.6 4.7 4.2 3.4 3.5 3.5 3.6 4.1 4.3

Ave. Utilization 4.9 5.0 5.4 5.6 5.3 5.6 5.6 5.6 5.1 5.2 5.2 5.1 5.3 5.1

Availability of Gates and Related Facilities

Table 3 shows the daily departing seats requirements expressed as percentages of the total departing

seats requirements. The master lease airlines, either through the Facility Termination or Forced

Accommodation provision, are required to meet a 60% threshold of each one of their requirements.

Through these provisions, the Port Authority has the ability to go to these airlines and recover space for a

new entrant or limited incumbent with assigned aeronautical slots.

Table 3. 2012 EWR Schedule of Airline Daily Departing Seats Percentage Requirements

Carriers shown have percentage departure seats requirements. Common Use Airlines and Southwest Airlines do not have this

requirement.

Terminal A Annual 2011

Satellite A-1 Jan-12

Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Average Average

Air Canada 46.2% 46.2% 46.0% 45.9% 43.2% 43.8% 45.9% 44.7% 42.8% 43.5% 45.4% 45.3% 44.9% 45.1%

United 34.8% 34.9% 34.7% 34.6% 32.6% 33.0% 34.6% 33.7% 32.3% 32.8% 34.2% 34.2% 33.9% 34.0%

Satellite A-2

United Express 146.0% 150.8% 164.1% 173.5% 173.3% 172.1% 164.6% 202.9% 218.0% 230.9% 213.2% 206.1% 184.7% 155.0%

Satellite A-3

American 20.3% 20.5% 22.1% 21.5% 21.7% 21.5% 21.1% 21.3% 20.5% 20.7% 21.1% 20.9% 21.1% 22.8%

USAirw ays 69.0% 70.1% 69.8% 66.8% 67.8% 70.8% 69.1% 69.9% 71.4% 70.7% 71.6% 71.9% 69.9% 66.4%

Terminal B

Satellite B-1

Delta3 65.5% 66.1% 70.2% 66.9% 67.1% 71.9% 70.9% 72.0% 68.4% 67.0% 61.7% 52.0% 66.6% 82.5%

Terminal C

United 68.1% 70.5% 77.4% 81.3% 77.2% 82.3% 82.8% 78.2% 64.2% 66.4% 66.2% 67.4% 73.5% 74.3%

Leasing and Subleasing Arrangements

II. Leasing and Subleasing Arrangements

A. Copies of Amended and New Lease Agreements

Please refer to Attachment A for copies of the three referenced agreements:

• American Airlines, Inc. has surrendered Gates A30, A31, and A32 in Terminal A-3 to the

Port Authority as part of their voluntary petition under Chapter 11 of Title 11 of the

United States Bankruptcy Code, effective December 31, 2012.

• Port Authority entered in a new agreement of lease with Virgin America Inc. for the letting

of Gate A32 and associated space, effective January 1, 2013.

• Pending PA board approval, the Port Authority will be entering into a lease extension

with Continental Airlines for Terminal C1 and C2 to be effective April 1, 2013.

B. Description of Any Major Changes

The agreements mentioned above do not change any of the existing master lease provisions, including no

changes to language pertaining to security deposit requirements, airline service standards or requesting

airlines at the airport. They reflect a surrender of gates by American Airlines Inc. to the Port Authority,

execution of a new lease agreement between Virgin America Airlines and the Port Authority, and an

extension of Continental Airlines agreement for Terminal C1 and C2.

C. Resolution of Any Disputes Between Carriers Relating to Access

Incumbent air carriers are encouraged to work with new entrant air carriers to accommodate the need for

gate availability and associated space. In Terminal B, the Port Authority works with the carriers and

monitors gate utilization times, allowing it to remain informed of gate availability for new entrants. Air

carriers interested in Terminal B common use gates are directed to speak to a Port Authority Property

Representative for assistance. The Port Authority also monitors the activity on the common use gates in

Terminal A. Airlines interested in gates here also work with a Port Authority Property Representative to

enter into a common use agreement. If the airport’s common use gates are not available, incumbent air

carriers are encouraged to provide gate availability within their exclusively leased space. To date, there has

been no dispute among carriers relating to access of airport gates.

Patterns of Air Service

III. Patterns of Air Service

A. Number of Non-Stop Markets Served

At the end of 2012, EWR served 170 non-stop markets made up of 89 domestic markets and 81

international markets.

Starting April 2, 2013 Virgin America will begin serving EWR with six daily nonstop flights, three to Los

Angeles, and three to San Francisco. These Virgin America destinations are major Origin Destination

(O&D) markets from EWR, with this new service providing an additional airline choice for travel, and

additional airline competition at EWR with the potential for boosting passenger growth at EWR. These

destinations also contain some of Virgin America’s largest operations, therefore offering a multitude of

connecting options to other destinations.

B. Number of Markets Served by Low-Fare Carriers

Low-fare carriers serve markets based on data gathered at the end of 2012. These markets include Boston,

San Juan (SJU), Denver, Phoenix, Houston, Chicago (MDW), Baltimore, Saint Louis, Fort Lauderdale,

Orlando, West Palm Beach, Tampa, and Fort Myers.

Patterns of Air Service

C. Number of Markets Served by One Carrier

At the end of 2012, 117 nonstop markets were served by only one carrier out of 170 total nonstop markets.

Table 4. 2012 EWR Nonstop Markets

2012 EWR Nonstop Markets

Total Markets

Domestic 89

International 81

Total 170

Markets w/ Two or More

Carriers

Domestic 24

International 18

sub total 42

United Only Markets

United Domestic 62

United International 55

sub total 117

Other Single Carrier Markets

Domestic* 3

8 International**

sub total 11

*Delta Service to Salt Lake City

Southwest to Houston (Hobby),

Southwest to Chicago (Midway),

**Lufthansa to Dusseldorf, Germany,

Open Skies to Paris Orly, France,

Lufthansa to Dusseldorf, Germany,

TAP Air Portugal to Porto, Portugal,

Singapore Airlines to Singapore,

Porter Airlines to Toronto City Airport,

Iceland Express to Reykjavik, Iceland,

LOT Polish to Warsaw, Poland

Gate Assignment Policy

IV. Gate Assignment Policy

A. Major Changes in Assignment Policies

There has been no change in Gate Assignment Policies since the last competition plan update. As

mentioned in Section 1 of this report, the Port Authority continues to ensure that airlines requesting gates

be accommodated whether it be through use of the Common Use Gates or through an arrangement with an

incumbent airline. Since the last submission in March 2011, the Port Authority has not encountered such

requests.

B. Changes in RON Position Assignment Policies

There has been no change in RON Position Assignment Policies since the last competition plan update.

C. Real Time Gate Utilization

The Port Authority continues to provide real time gate utilization for the gates that it operates in Terminal B

at the International Facility. Utilization is tracked on a monthly basis for the gates in Terminal A.

Financial Constraints

• Security Enhancement Projects for Terminal Building Frontages (Bollards)

Financial Constraints

A. Major Source of Revenue at the Airport for Terminal Projects

In general, terminals have been funded by airline special facility bonds, airline direct investment, Port

Authority investment, PFCs and grants.

The current Terminal B Modernization Program, which includes development of a new lower-level arrival

area, the in-line baggage systems and satellite connectors; enhanced security; and improvements to

roadways and drainage systems, is being funded with Port Authority capital, PFCs and AIP grants.

The Port Authority is also advancing the planning for a new Terminal A, primarily funded through PFCs.

B. Rates and Charges Methodology (Residual, Compensatory, or Hybrid)

There has been no change in rates and charges methodologies used by the Port Authority since the last

update.

C. Past Use of PFCs for Gate and Related Terminal Projects

The following gate and terminal related projects have been funded with PFCs:

• Fire Alarm System Upgrade (Terminal B)

• Terminal A Redevelopment – Phase II Planning Program

• Modernization of Terminal B at EWR (amendment)

• Vertical Circulation Improvements in Terminal A

D. Availability of Discretionary Income for Airport Capital Improvement Projects

The Port Authority’s capital plan has been severely constrained in recent years due to the economic

recession. Further, the Aviation Department’s capital capacity has been limited by the inability to increase

the PFC rate above $4.50.

Airport Controls over Airside and Groundside Capacity

VI. Airport Controls over Airside and Groundside Capacity

A. Majority-In-Interest (MII) or “No Further Rates and Charges” Clauses Covering

Groundside and Airside Projects

Newark Liberty International Airport is not a Majority-in-Interest airport.

B. Any Capital Construction Projects that have been Delayed or Prevented because an

MII was Invoked

Not applicable.

C. Plans, if any, to Modify Existing MII Agreements

Not applicable.

D. Other Airport Controls over Airside Capacity

Per the Federal Regulation of 2008 with respect to Congestion Management, EWR is limited to 81

operations per hour from 0600 until 2259. During several key hours, including the peak afternoon hours, the

FAA has allocated all of the available aeronautical capacity. As such, a carrier seeking to enter or expand

service at EWR is either prevented from doing so or must enter into an agreement with an existing slot

holder, which is likely to be a competitor. Carriers seeking to launch domestic service often need a

minimum of three to four slot pairs including a pair during the afternoon peak hours in order to offer a basic

level of service.

Airports Intentions to Build or Acquire Common Use Gates

VII.

A. New Designation of Gates A30 and A31

Airport Intentions to Build or Acquire Common Use Gates

American Airlines surrendered premises consisting of Gates A30, A31 and A32 in Terminal A-3, and

associated office and operational space. The Port Authority has designated the newly surrendered A30 and

A31gates as Common-Use Gates. This brings the current total to 22 Common-use Gates within the airport.

These Common-Use Gates offer a more efficient use of existing space, offer congestion relief and

improved traveling options for passengers, consequently allowing for greater competition within the airport.

B. Expansion of Terminal A

Table 5 below shows statistics for passenger and aircraft movements for 2006 (the first year levels were

higher than the levels reported prior to 9/11), 2012 (the most current statistics) and 2030 (forecasted).

The current state of the economy has had a negative impact on passenger levels and aircraft movements

as shown for 2012. Yet, different forecasts are showing an increase in passengers and movements through

2030. The Port Authority is forecasting approximately 53.9 million passengers for 2030.

Table 5. Statistics and Forecasts for EWR

2006

2012

2030

Passengers (in millions)

35.7

34.0

53.9

Aircraft Movements

446,166

413,346

565,868

As the planning for Phase I of the Terminal A Redevelopment Program (Program) came to a closure in

2009, Phase II planning was authorized at an estimated cost of $30 million, bringing the total authorized

planning costs associated with these efforts to $50 million, all of which are eligible for reimbursement via

PFCs.

The program plans to complete Phase II planning in early 2013. Phase II planning work includes continued

negotiations with the airlines on business model alternatives, fees and charges, economic feasibility and

terminal functional and performance criteria. Additionally, it includes the refinement of a master site plan,

continued value planning and engineering, formulation of a new terminal basis of design report, preliminary

contract package definition for airside, landside and infrastructure/utility improvements, continued

Airports Intentions to Build or Acquire Common Use Gates

environmental assessments and program integrated scheduling and cost estimating.

In November of 2012, fifty-percent of the Stage 1 terminal design was completed, and full Stage 1 terminal

design is anticipated for completion within the first quarter of 2013. In December of 2012, the Program

completed the Environmental Assessment to the FAA, and expects a FONSI by March of 2013. They are

seeking a full program authorization in the first quarter of 2013, and the goal is to have the new Terminal

fully operational by 2018.

Creating new infrastructure to accommodate the future needs and safety of the travelling public and to

continue to offer competitive choice in new and existing markets is a main concern in the planning of the

future of Terminal A, which will initially add 5 new gates and 17 new gates by 2030.

Airfare Levels as Compared to Other Large Airports

VIII.

Chart 1 shows Average Fares as published by the Bureau of Transportation Statistics and based on

domestic itinerary fares, round-trip or one-way for which no return is purchased. Fares are also based on

the total ticket value, consisting of the price charged by the airlines plus any additional taxes and fees

levied by an outside entity at the time of purchase. Fares include only the price paid at the time of the ticket

purchase and do not include other fees, such as baggage fees, paid at the airport or onboard the aircraft.

Averages do not include frequent-flyer or “zero fares” or a few abnormally high reported fares.

Airfare Levels as Compared to Other Large Airports

Chart 1. Average Fares, Bureau of Transportation Statistics

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

Avg US

Fare

JFK LGA EWR ATL ORD LAX IAH DCA

AVERAGE US AIRFARE BY MAJOR AIRPORT

2008 Q3

2009 Q3

2010 Q3

2011 Q3

2012 Q3