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enilria
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:00 pm

Actually the argument about it resulting in small, high cost transatlantic aircraft is actually a good point.

http://www.thestreet.com/story/12758...nalyst-says-as-he-cuts-rating.html
 
airbazar
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:15 pm

Quoting Enilria (Thread starter):
Actually the argument about it resulting in small, high cost transatlantic aircraft is actually a good point.

It makes no sense to me. He also says:
"What United should do, McAdoo argued, is to close the Dulles hub, given its proximity to the hub in Newark, N.J. Other airlines have realized synergies by closing hubs that are close together, he said, and United has already moved to close its redundant Cleveland hub."

And yet AA operates not 1, not 2, but 3 hubs in the same region: JFK/PHL/DCA, and CLT a little further south. Moreover, EWR is slot restricted and can't handle Group VI aircraft and probably won't for a very long time. EWR's congestion makes IAD relevant.
 
avek00
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:20 pm

In no way are IAD and EWR good substitites for each other. And IAD has a problem of being undersized, not too large.
Live life to the fullest.
 
catiii
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:22 pm

Quoting airbazar (Reply 1):
Other airlines have realized synergies by closing hubs that are close together, he said, and United has already moved to close its redundant Cleveland hub."

Right, like that DL MSP hub that poaches DTW. Oh wait...   
 
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Tugger
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:27 pm

Wall Street is full of stupid people.

They don't necessarily understand industries, they primarily focus on how to pull money out of companies to hopefully make their investments looks better. And theoretically this leads to making the company better and more efficient and more attractive to other investors.

Which of course does not actually make a company or its product better (it could potentially improve stock value which can allow increased access to cash needed for business actions/reasons).

Tugg
I don’t know that I am unafraid to be myself, but it is hard to be somebody else. - W. Shatner
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LV
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:28 pm

Um, do these analysts realize how much government and NGO travel their is out of IAD?
 
Prost
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:35 pm

The beefing up of DCA by AA, with the slot divestment to other carriers, has probably put a crimp on the IAD traffic and revenues. There will always be a market for international travel to the nation's capitol, I just don't know how they can profitably feed that traffic with DCA nearby.

In hindsight, I wonder if we all would have been better served with DCA being closed after 9/11 and a "Sherman Plan" of sorts to make IAD more attractive as an airport-- high speed rail to the city center, new terminals to handle the increased traffic, etc. Sell the land DCA is on, which would command a high price to pay off the bonds needed for IAD.

[Edited 2014-06-26 11:35:59]
 
commavia
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:37 pm

Quoting airbazar (Reply 1):
And yet AA operates not 1, not 2, but 3 hubs in the same region: JFK/PHL/DCA, and CLT a little further south.

I continue to believe that this comparison is largely moot.

JFK and DCA are not true megahubs the way PHL and EWR are. JFK is a relatively small operation - I, honestly, hesitate to even call it a true "hub" - that sees about 100 daily departures, almost none in shorthaul/regional markets, while DCA is a near-entirely domestic operation, also heavily O&D-focused, that cannot function as a true longhaul hub. PHL is unique among AA's northeast hubs in that it can be "all of the above." CLT isn't even in the running - it's hundreds of miles away and serves a totally different purpose.

The difference with EWR/IAD is that, for United, the two hubs actually do serve almost the exact same network function, with both catering to very large local markets, but both also handling lots of connections in and out of the northeast, and to and from Europe.

Quoting airbazar (Reply 1):
Moreover, EWR is slot restricted and can't handle Group VI aircraft and probably won't for a very long time.

Not sure why Group VI aircraft would be all that relevant an issue one way or another for United.

Quoting airbazar (Reply 1):
EWR's congestion makes IAD relevant.

Yes and no. EWR is horribly congested, but then so is PHL, LGA, JFK, etc. - it's pretty much the nature of the beast in the northeast. As for IAD, it's great that the airport is far less a congested, but the flip side of that is that there's a reason - it's an airport that seems to struggle supporting a network airline hub.

Quoting LV (Reply 5):
Um, do these analysts realize how much government and NGO travel their is out of IAD?

True. The issue, though, is who much of that traffic can be profitably captured and whether or not those profits are required to subsidize domestic traffic operated primarily with smaller jets up against more demand and often higher yields at DCA.

Personally, I still contend that if AA is smart and plays their cards right they can leverage their merged position at DCA to build a relatively small, primarily-O&D-focused longhaul operation at IAD and skim traffic away from United by combining a very compelling domestic network ex-DCA with a "good enough" network at IAD (similar to the set up United was able to offer FFs prior to last year with reciprocal earn/burn with then-Star-partner USAirways). I'm not saying this will happen per se, but I don't think it's inconceivable.
 
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:39 pm

Quoting catiii (Reply 3):
Right, like that DL MSP hub that poaches DTW. Oh wait...  

I've often wondered that-- how do MSP and DTW operate together ? Do they cannibalize each other ? Detroit in particular seems a huge international hub for Delta (and hitherto Northwest).
 
commavia
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:40 pm

Quoting Prost (Reply 6):
In hindsight, I wonder if we all would have been better served with DCA being closed after 9/11 and a "Sherman Plan" of sorts to make IAD more attractive as an airport-- high speed rail to the city center, new terminals to handle the increased traffic, etc. Sell the land DCA is on, which would command a high price to pay off the bonds needed for IAD.

Well United certainly would have been better off. The rest of the country? That's debatable - for every entrenched interest (i.e., United) that likely would have loved to see DCA shut down permanently and all WAS-region traffic consolidated at IAD, there are plenty of other entrenched interests (including, but not limited to, USAirways, plus of course many demanding politicians) who would have been far less enthusiastic about such a move.
 
dtw2hyd
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:48 pm

This is one confused establishment. Integration of UA/CO was shoddy at best. Every week someone calls for leadership change but nothing happens.

What wall-street asking is run-of-the-mill corrective actions for an ailing airline.

Optimize/downsize the network. Cut routes which are not profitable. Cut down the fleet. Find your niche. Grow back up.
All posts are just opinions.
 
bchandl
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 6:57 pm

Quoting airbazar (Reply 1):
And yet AA operates not 1, not 2, but 3 hubs in the same region: JFK/PHL/DCA, and CLT a little further south.

Claiming that CLT is in any way near, or serves the same market as these three hubs is just dead wrong.

CLT is 450mi away from PHL. So by your logic anyone who operates a hub in the northeast should close that or another hub if it falls into these circles? Please.

http://www.gcmap.com/mapui?R=450mi%4...DCA&R=450mi%40phl%0d%0a450mi%40JFK

Quoting tugger (Reply 4):
Wall Street is full of stupid people.

Actually, Wall Street is full of the brightest business people in the world.

People that are a lot smarter than you or I.

If everyone is so stupid that works there, yet they get paid quite nicely, why haven't you or I taken a job there? Can't be high expecations since we are all so stupid.

What your lashing out, immature comment is overlooking is that these people's assessments only look at one thing. The bottom line.

They are only asking themselves when they're analyzing these markets, would closing IAD and moving it to EWR make the bottom line better at UAL?

Given the costs of running a hub, they may be right. However, that does not mean that they are going to do it.
 
ordbosewr
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:01 pm

Quoting LV (Reply 5):
Um, do these analysts realize how much government and NGO travel their is out of IAD?

no, why bother understand what the use of the Hub is and why

Quoting dtw2hyd (Reply 10):
Every week someone calls for leadership change but nothing happens.

I think the only way the current leadership is sent out the door is by wall street calling for it. While this is a good piece of information for those that want to see that leadership change this is not going to do the trick.

Remember they downgraded them to Neutral. If they downgraded to sell, that would get the real eyes and hears of the BoD of UAL
 
catiii
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:06 pm

Quoting bchandl (Reply 11):
Actually, Wall Street is full of the brightest business people in the world.

People that are a lot smarter than you or I.

So smart that they brought the world to the brink of financial ruin in 2008 by creating shoddy securitized instruments that, by their own admission, they didn't even understand.

Having worked for a spell on Wall Street, they're not that smart...
 
solarflyer22
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:07 pm

Quoting bchandl (Reply 11):
Actually, Wall Street is full of the brightest business people in the world.

People that are a lot smarter than you or I.

After the financial crisis of 2008, I don't think you can make this point. It's also more than IQ, its understanding how a system, your customers and aviation works. Its about long term strategy and rewards over short term strategy and rewards.

The Street is also shall we say, a little too risk tolerant.

Closing IAD in deference to EWR makes 0, I mean 0 sense. Did WSJ even factor in the congestion/routing of air traffic of NYC's airspace? I seriously doubt it.

There are other ways to improve the bottom line faster and easier. Southwest turned BWI of all places into a hub in just the past 5 years and its worked quite well. I remember WSJ complaining about that too.
 
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IrishAyes
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:07 pm

Quoting airbazar (Reply 1):
It makes no sense to me. He also says:
"What United should do, McAdoo argued, is to close the Dulles hub, given its proximity to the hub in Newark, N.J. Other airlines have realized synergies by closing hubs that are close together, he said, and United has already moved to close its redundant Cleveland hub."

And yet AA operates not 1, not 2, but 3 hubs in the same region: JFK/PHL/DCA, and CLT a little further south. Moreover, EWR is slot restricted and can't handle Group VI aircraft and probably won't for a very long time. EWR's congestion makes IAD relevant.

  

Honestly, I often fail to see why the people (namely news sources) venerate Bob McAdoo to the degree at which seems to be the norm. Sure, from time to time, he makes good points, others, he completely grasps at straws and I don't believe his logic is 100% accurate.

I recall the article in which he claimed that AA loses money on its MIA-EZE flights, which I refuse to believe.

Moreover, a comparison of CLE to IAD is also just stupid. Completely apples to oranges.

Quoting AT (Reply 8):
I've often wondered that-- how do MSP and DTW operate together ? Do they cannibalize each other ? Detroit in particular seems a huge international hub for Delta (and hitherto Northwest).

Not in the slightest.

Both hubs serve entirely different functions. MSP supports a large volume of high-yielding O&D traffic heading to and from the Twin Cities, supported by the large number of Fortune 500 companies with headquarters in the region. It also has a great mid-continent location, even though slightly more northerly, but it is great for East-West connections as well as connecting large metropolitan areas to small markets in the Upper Midwest, Great Plains, Canada and Rockies.

DTW, in a similar vein, also has a large volume of O&D along with lucrative corporate traffic supported by the Big 3, and also served as pmNW's primary TATL and TPAC gateway hub.

One must also remember that the investments that NWA and DL have made in the infrastructure and facilities at both airports make them excellent places for layovers and connections. Even though I have strong loyalties to DFW (hometown airport) and ORD (where I lived for 3 years), ever since I relocated to MSP in September, I have quickly grown to fall in love with it because its a pleasure to inhabit.
 
max999
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:16 pm

There's a lot more in this article than just the IAD and EWR hubs.

For example, he rips into the $2 billion cost cutting plan as being ineffective at raising revenue growth seen at DL and AA.

Quote:
McAdoo panned the presentation United executives made at a November investor day event, where they outlined a $2 billion program of cost and revenue improvements.

It "seemed more likely to be found in a typical operating department's annual budget presentation than in a corporate presentation as to how United's results would be lifted to record levels," he wrote, noting that adjustments such as reducing overtime "will not close the gap with Delta and American."

UA's heavy reliance on small RJ compared to its competition is raising their flying costs. And UA is not fixing this problem as quickly as its rivals.

Quote:
Another issue is that United relies more heavily on inefficient 50-seat regional jets than any other U.S. airline does. United carries 7.6% of its capacity -- measured by available seat mile -- on 50-seat jets, compared with 5.3% at American and 3.4% at Delta, and both carriers are acting quickly to reduce the number even further.
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Rdh3e
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:19 pm

Quoting bchandl (Reply 11):
CLT is 450mi away from PHL

But it's only 330mi from DCA... They have 4 hubs on the eastern seaboard, 3 of which are in the same area that IAD/EWR operate.

Oh and lets also remind ourselves that DL has 2 in the same city! JFK/LGA
 
dtw2hyd
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:25 pm

Quoting AT (Reply 8):
I've often wondered that-- how do MSP and DTW operate together ? Do they cannibalize each other ? Detroit in particular seems a huge international hub for Delta (and hitherto Northwest).

Detroit Metro has 5+ Million population. Has 500K tech jobs. MI state GDP close to VA, almost all private sector. 2013 GDP growth was 2.0% vs VAs 0.1%. State has $Billion+ surplus budget.

But bad news from City of Detroit gets all the news coverage.
All posts are just opinions.
 
SonomaFlyer
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:38 pm

Without a break down of numbers to compare, its difficult to declare UA or McAdoo right. However, UA must get rid of its 50 seat r/js faster and look to axe less profitable routes.

IAD would be better served as a focus city; keep the point to point Euro Traffic to which IAD excels and consider whether the domestic connection stuff is a good idea given EWR. If UA moved more flying at EWR to mainline, they could boost capacity and ease congestion there at the same time.

Sadly, UA will likely do nothing about leveraging EWR and IAD and they will keep stumbling along.
 
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Tugger
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:39 pm

Quoting bchandl (Reply 11):
Actually, Wall Street is full of the brightest business people in the world.

People that are a lot smarter than you or I.

If everyone is so stupid that works there, yet they get paid quite nicely, why haven't you or I taken a job there? Can't be high expecations since we are all so stupid.

What your lashing out, immature comment is overlooking is that these people's assessments only look at one thing. The bottom line.

They are only asking themselves when they're analyzing these markets, would closing IAD and moving it to EWR make the bottom line better at UAL?

Given the costs of running a hub, they may be right. However, that does not mean that they are going to do it.

Boy, talk about not reading things correctly, extrapolating what I think on an incorrect assumption, accusing me of what you believe/attribute to me (but is not what I have stated) and then going on to the point of the issue....

I did not say that some of the most intelligent people in the world do not work in Wall Street. I did not say that there are not many people in Wall Street that are more intelligent than me.

And I did not "lash out"... where the heck did you get that?

I did say that Wall Street is full of stupid people. And it is, like most everywhere. The gentleman is putting forth a relatively simplistic analysis, one that does not capture the issue at hand fully compared to what airlines must consider across their business model.

I also noted that Wall Street's focus is different than a companies focus. The key thing Wall Street needs and wants is growth, money returned to investors, and the next quarter to be better than the last. Wall Street has no loyalty to a company and can and will pull its money out quickly if its desires are not met. At the very least Wall Street will not increase its investment. Not surprising of course. But a company's primary goal must be its product and its customers, a company needs to build loyalty and provide a good product, and produce such at a profit. For public companies Wall Street adds an additional burden in trade for access to its benefit. It provides a large infusion of cash up front (stock offering) but demands that money back with continuous interest.

It is what it is. Neither good or bad, neither smart or stupid (unlike the people that work there), it drives for one basic overall goal, and by that goal it can drive companies to be better or worse. It is up to the companies to manage themselves. It is Wall Street.

But your end point:
Quoting bchandl (Reply 11):

Given the costs of running a hub, they may be right. However, that does not mean that they are going to do it.

is accurate enough (though you confuse your "they"'s by not clarifying that the first one relates to the Wall Street analyst and the second one to UA's possible decision).

Tugg
I don’t know that I am unafraid to be myself, but it is hard to be somebody else. - W. Shatner
There are many kinds of sentences that we think state facts about the world but that are really just expressions of our attitudes. - F. Ramsey
 
airbazar
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:47 pm

Quoting commavia (Reply 7):
Not sure why Group VI aircraft would be all that relevant an issue one way or another for United.

Because IAD is LH's primary TATL connecting hub where they operate Group VI aircraft to, and UA and LH have a TATL JV. And it's not inconceivable that in the future UA will also order the 777X.

Quoting commavia (Reply 7):

Yes and no. EWR is horribly congested, but then so is PHL, LGA, JFK, etc. - it's pretty much the nature of the beast in the northeast.

That's my point. Hence why AA is keeping CLT, not dumping it, despite what many here may believe.

Quoting bchandl (Reply 11):
Claiming that CLT is in any way near, or serves the same market as these three hubs is just dead wrong.

CLT serves the Southeast just like IAD is UA's hub to the Southeast. It's exactly the same market with some overlap of course.
 
PSU.DTW.SCE
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 7:49 pm

To elaborate, they are far enough apart to have different reach:

Quoting irishayes (Reply 15):
Both hubs serve entirely different functions. MSP supports a large volume of high-yielding O&D traffic heading to and from the Twin Cities, supported by the large number of Fortune 500 companies with headquarters in the region. It also has a great mid-continent location, even though slightly more northerly, but it is great for East-West connections as well as connecting large metropolitan areas to small markets in the Upper Midwest, Great Plains, Canada and Rockies.

MSP has strong local O&D. In addition, 150-seat narrowbody aircraft - 738/A320/MD90 can all be optimized to fly to either coast from MSP- enabling connections from mid-sized markets. A strong summertime flow of traffic in to smaller/vacation/resort markets in the Rockies, Canada, Alaska. Ability to serve smaller markets in the Upper Midwest that would otherwise be ineffective to serve on longer-stage length flights into DTW (routes like DTW-FAR would not support 600-700 seats/day across 8 flights like MSP-FAR)

Quoting irishayes (Reply 15):
DTW, in a similar vein, also has a large volume of O&D along with lucrative corporate traffic supported by the Big 3, and also served as pmNW's primary TATL and TPAC gateway hub.

DTW has good connectivity to the Ohio Valley and the manufacturing/industrial heartland of the country, Mid-Atlantic, Northeast. A lof the small and mid-sized markets that feed DTW would be effectively served on RJs over MSP versus DTW.
 
MIflyer12
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:00 pm

Quoting irishayes (Reply 15):
MSP supports a large volume of high-yielding O&D traffic heading to and from the Twin Cities, supported by the large number of Fortune 500 companies with headquarters in the region.
Quoting irishayes (Reply 15):
DTW, in a similar vein, also has a large volume of O&D along with lucrative corporate traffic supported by the Big 3, and also served as pmNW's primary TATL and TPAC gateway hub.

You manage to be wrong on both MSP and DTW. They are among the U.S. network hubs with the absolute lowest fraction of O&D travel. They punch way above their weight to comparable metro areas not by high O&D traffic but by volume of connecting passengers.

They manage to survive internecine struggle because at 528sm they're nowhere near as close as IAD-EWR (212sm), CVG-DTW (229sm), or MEM-ATL (332sm). Proximity to another carrier's megahub is challenging; proximity to a mega-hub by your own carrier may be worse. MSP and DTW also survive by smart destination management; both have unique destinations in their respective geographies that couldn't be served by the other. I dare say that few people from DTW want to travel to Fargo often but MSP's global ag businesses help support eight n/s MSP-FAR today.

The analyst's thesis has some traction. He didn't say walk away from all IAD connecting traffic - he said use bigger aircraft out of other hubs. DL does that to good effect: look at the mainline percentage of departures by DL@ATL vs. AA@DFW, AA/[email protected]CLT or UA@ORD. Bigger planes = lower CASM and less congestion for the same passenger volume. DL has claimed it leads to happier passengers and higher yields (overcoming the typical frequency premium).
 
CV880
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:12 pm

Quoting sonomaflyer (Reply 20):
Sadly, UA will likely do nothing about leveraging EWR and IAD and they will keep stumbling along.

I wonder if the proposed merger of UA/US had been approved in 2001, would the merger with CO have occurred as it was years later and post bk. That scenario would have been overall better for the UA of today. IAD ia not far enough south for a Southeast Hub and UA would have to go head to head with AA/MIA or DL/ATL to gain what CLT would have given them years ago.
 
runningonempty
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:13 pm

Quoting solarflyer22 (Reply 14):
There are other ways to improve the bottom line faster and easier. Southwest turned BWI of all places into a hub in just the past 5 years and its worked quite well. I remember WSJ complaining about that too.

BWI has been a hub-in-progress for Southwest for over a decade. Not in any case the last five years. I do believe closing IAD is a poor idea for Uniteds' growth plans and may be "too much" consolidation, but It could really help them streamline what they have. I think personally they should dehub it, and start again. They need to dehub in order to maybe push away some ExpressJet ERjs because in order for them to streamline (and turn a profit) they should keep away from those small >50 seaters. I think Q400s and EMB175 only would make a smarter hub at IAD. They may not be able to serve certain previous routes, but they will be able to be stronger at IAD. Plus it'll give them a little more edge against F9 (even if F9 has its own type of customer).
 
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jetblastdubai
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:27 pm

Quoting sonomaflyer (Reply 20):
If UA moved more flying at EWR to mainline, they could boost capacity and ease congestion there at the same time.

This would happen only if UA upguaged aircraft size and could reduce the number of total flights without having other carriers pick up the newly-unused slots bringing them full-circle back to the congestion problem. Only if the Port Authority could somehow buy back some slots or allow UA to "volunteer" to stop using some slots without allowing anyone else to pick them up could the congestion problem be addressed. By reducing total flights but converting most RJ to mainline, landing fee revenue for the Port Authority should be very close or even higher than what it is today.

Quoting bchandl (Reply 11):
They are only asking themselves when they're analyzing these markets, would closing IAD and moving it to EWR make the bottom line better at UAL?

It'd be impossible to move anything from IAD to EWR because EWR is already at or very near 100% capacity. I'm not too familiar with the gate situation at EWR but they might not have enough gate space if all or most of the RJs were converted to mainline. EWR is landlocked and very near capacity. IAD has boatloads of space and unused capacity. Why throw away the airport with the most potential in favor of a delay-prone airport with almost no expansion potential?

Each airport has it's unique Int'l role but maintaining two domestic hubs that both serve a N/S flow is where a decision might need to be made. I'd like to see the FAA or the Port Authority broker some type of deal with all the EWR users to help address the delay/congestion issues.
 
bchandl
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:36 pm

Quoting tugger (Reply 21):
At the very least Wall Street will not increase its investment.

I'm not entirely sure what you mean here, it could mean a lot of things.... Do you mean investors won't buy the stock? Maybe, and maybe the price falls but it cannot fall very far because at some price point they would all jump back in because it would be an underpriced stock.

Of course, their stock price does not affect their bottom line. Outside of IPOs they don't see any of the invested cash, so this scenario isnt really relevant.

Do you mean they(UAL) would have more trouble securing financing through a large investment bank? Maybe, they're going to look at a potential collateralized loan much more objectively.

Quoting tugger (Reply 21):
is accurate enough (though you confuse your "they"'s by not clarifying that the first one relates to the Wall Street analyst and the second one to UA's possible decision).

That's my bad. I typed it how I would have said it.

Quoting jetblastdubai (Reply 28):
It'd be impossible to move anything from IAD to EWR because EWR is already at or very near 100% capacity

And give up your fortress hub in NYC? Fat chance.

I know there is no room at EWR, but giving up EWR is not the answer and will not end well for UAL.
 
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jetblastdubai
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:47 pm

Quoting bchandl (Reply 29):
know there is no room at EWR, but giving up EWR is not the answer and will not end well for UAL.

I didn't say to give it up....only to adjust the traffic levels to something that is manageable. 5% maybe? 2-3 flights/hour during peak delay periods...start somewhere.
 
BoeingGuy
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WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:54 pm

Quoting catiii (Reply 13):
Quoting bchandl (Reply 11):
Actually, Wall Street is full of the brightest business people in the world.

People that are a lot smarter than you or I.

So smart that they brought the world to the brink of financial ruin in 2008 by creating shoddy securitized instruments that, by their own admission, they didn't even understand.

Having worked for a spell on Wall Street, they're not that smart...

I agree with that. Wall Street knows nothing about nothing but counting beans and reading numbers on a spreadsheet.
 
strfyr51
Posts: 5106
Joined: Tue Apr 10, 2012 5:04 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 8:54 pm

Nobody runs UAL's business except UAL. No wall street Yahoo has anything to say but Hyperbole because He or she won't and Can't see the big picture unless they're ready and willing to take
over UAL which they're NOT!! Faggetaboutit !!
 
commavia
Posts: 11489
Joined: Mon Apr 25, 2005 2:30 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:01 pm

Quoting irishayes (Reply 15):
Honestly, I often fail to see why the people (namely news sources) venerate Bob McAdoo to the degree at which seems to be the norm. Sure, from time to time, he makes good points, others, he completely grasps at straws and I don't believe his logic is 100% accurate.

Agree.

Quoting RDH3E (Reply 18):
But it's only 330mi from DCA... They have 4 hubs on the eastern seaboard, 3 of which are in the same area that IAD/EWR operate.

Oh and lets also remind ourselves that DL has 2 in the same city! JFK/LGA

Again - it's not really the same comparison, though. JFK, LGA, and DCA cannot ever be for other airlines what EWR is for United and PHL is for AA - a all-day, omnidirectional, domestic and international megahub. The jury is very much still out on IAD in this regard.

Quoting airbazar (Reply 22):
Because IAD is LH's primary TATL connecting hub where they operate Group VI aircraft to, and UA and LH have a TATL JV. And it's not inconceivable that in the future UA will also order the 777X.

Not sure that's all that big a problem. Plenty of connectivity is already and can in the future be had via EWR whether it's on an A380/748 or not.

Quoting solarflyer22 (Reply 33):
Everyone on the gov tab has to fly a US carrier so might as well get some of that cheese.

Correction: U.S. government employees and contractors traveling in support of U.S. government contractors must flying on U.S. carrier-coded flights, but they need not necessarily fly on a U.S. carrier.
 
bchandl
Posts: 646
Joined: Tue Jul 19, 2011 7:49 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:01 pm

Quoting BoeingGuy (Reply 31):
I agree with that. Wall Street knows nothing about nothing but counting beans and reading numbers on a spreadsheet.

And do you know how many businesses can stay in business without counting beans and reading spreadsheets?

One. The United States Federal Government.

For the rest of us that actually have to live in reality, it is a crucial skill to understand and effectively manage the rest of a business' functions.

Quoting solarflyer22 (Reply 33):
Nice try, my brother is actually a former attorney at the SEC. Let's not even get into the hedge funder's "recreational activities".

How does that qualify you to say anything? I'm thoroughly confused.
 
toxtethogrady
Posts: 1861
Joined: Sat Dec 23, 2000 12:33 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:02 pm

Quoting tugger (Reply 4):
Wall Street is full of stupid people.

Quite true. And they come running to us taxpayers to bail them out of their stupidity.
 
toxtethogrady
Posts: 1861
Joined: Sat Dec 23, 2000 12:33 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:05 pm

Quoting Prost (Reply 6):
The beefing up of DCA by AA, with the slot divestment to other carriers, has probably put a crimp on the IAD traffic and revenues. There will always be a market for international travel to the nation's capitol, I just don't know how they can profitably feed that traffic with DCA nearby.

DCA will never be an international airport and will never be able to expand. This is as silly as all the people who claimed Malpensa would never make a good hub because Linate was closer to Milan.
 
toxtethogrady
Posts: 1861
Joined: Sat Dec 23, 2000 12:33 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:08 pm

Quoting bchandl (Reply 11):
If everyone is so stupid that works there, yet they get paid quite nicely, why haven't you or I taken a job there?

Perhaps for the same reason my career in the NBA has failed to take off. Being rich doesn't mean you're smart, and Wall Street is littered with all kinds of examples.
 
catiii
Posts: 3746
Joined: Mon Mar 31, 2008 1:18 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:11 pm

Quoting bchandl (Reply 35):

How does that qualify you to say anything? I'm thoroughly confused.

Before we go any further, can you share your qualifications with us? You seem to be hung up on how qualified everyone else is.
 
commavia
Posts: 11489
Joined: Mon Apr 25, 2005 2:30 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:16 pm

Quoting toxtethogrady (Reply 37):
DCA will never be an international airport and will never be able to expand.

Of course not. But it is the most in-demand domestic airport, and that's a big problem for IAD and whatever network airline is hubbed there.

Quoting toxtethogrady (Reply 37):
This is as silly as all the people who claimed Malpensa would never make a good hub because Linate was closer to Milan.

Uh ... those people have been proven pretty much right, and the comparison may well be - unfortunately for IAD - instructive.

Exactly as was predicted 15 years ago, MXP really isn't a true network hub today because the O&D pull of LIN, far more convenient and accessible than MXP, has undermined MXP's ability to function as a true domestic-to-international connecting point. Today, Alitalia has almost no presence at MXP, especially domestically, with virtually all its domestic and European traffic now at LIN and only a token longhaul presence, almost entirely focused on O&D, at MXP. The operator there with by far the largest number of routes is EasyJet.

The same basic situation appears to be happening at IAD - a generally more convenient and accessible airport is attracting more and more domestic/shorthaul O&D, undermining the ability of IAD to profitably sustain such traffic for a network airline, and in turn challenging the economics of the entire operation as a hub rather than just a somewhat large longhaul O&D station with domestic O&D catered to increasingly by low fare rather than network carriers.
 
lhcvg
Posts: 1255
Joined: Mon May 25, 2009 2:53 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:20 pm

Quoting sonomaflyer (Reply 20):

I'd argue there is a bit of a chicken-and-egg problem here: to some extent, the hub feeds and helps support the intl flights. OTOH, the hub obviously is not optimal and might be able to be scaled back purely from a network perspective (i.e., split connecting traffic among ORD and EWR). But as it stands, they might end up on a slippery slope where rationalizing connectivity between EWR/IAD might make some of the ex-IAD intl flights unprofitable, which might mean they dump them, which might mean the hub has even less value, and then becomes less viable as a large station for UA (the associated costs of running a large operation).

I realize that's vastly oversimplified in a couple areas, but something I've been wondering about, insofar as UA may be stuck with their current situation, more or less.
 
jfk777
Posts: 7442
Joined: Tue Aug 22, 2006 7:23 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:21 pm

IAD has never been a traditional east coast hub but more of a JFK for United that was not in New York. It was UA's European gateway on the east coast handling all kinds of international flights and transcon flights. DCA handles al the short haul flights. UA also carries all the people in the US Government going to Europe.

IAD gave United an east coast presence for Europe since so many passengers for Atlantic travel originate on the east coast. The midwest and west coast generate less then 50% od travel to Europe so if UA wanted to be a player they need Dulles.
 
solarflyer22
Posts: 1517
Joined: Wed Nov 25, 2009 7:07 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:31 pm

Quoting bchandl (Reply 35):
How does that qualify you to say anything? I'm thoroughly confused.

Allow me to un-confuse you. It means my brother was a lawyer with the SEC regulating hedge funds, mutual funds and pension plans. Some of his knowledge gained from working first hand with the savants of Wall Street made its way to me. And that qualifies me to say they are merely a cadre of people attracted to the lure of money with slightly higher than normal IQ's. Not rocket scientists by any means. I also invest actively and am well read on the street. I know what mortgage backed securities, derivatives and collateralized debt obligations are.

Quoting commavia (Reply 34):
Correction: U.S. government employees and contractors traveling in support of U.S. government contractors must flying on U.S. carrier-coded flights, but they need not necessarily fly on a U.S. carrier.

True, but most of that traffic heads to UA with small amounts going to Lufthansa and BA.
 
LAXdude1023
Posts: 6224
Joined: Thu Sep 07, 2006 3:16 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:38 pm

And give up what is probably one of the top 5 most important travel markets in the US internationally? NEVER!
FOR THE LOVE OF GOD BRING BACK THE PAYWALL!!!!
 
User avatar
IrishAyes
Posts: 2444
Joined: Sat Jan 26, 2008 6:04 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:39 pm

Quoting MIflyer12 (Reply 25):
You manage to be wrong on both MSP and DTW. They are among the U.S. network hubs with the absolute lowest fraction of O&D travel. They punch way above their weight to comparable metro areas not by high O&D traffic but by volume of connecting passengers.

I never claimed that either city boasted a high fraction of O&D travelers relative to connecting travelers, but even when viewed in isolation, the O&D numbers supported by both cities are still pretty large and substantial given that relative to their individual population sizes, there are a substantial number of larger cities that do not even make the top 25 list (SAT, SJC, AUS, IND, JAX, CMH, etc).

I will agree that relative to the other network hubs, they rank on the lower end, but they still generate a ton of O&D, that was basically the point of my original post.

1) New York: 245,750 passengers per day
2) Los Angeles: 184,296
3) Miami: 131,265
4) Chicago: 127,776
5) San Francisco: 120,382
6) Washington DC: 120,201
7) Las Vegas: 91,114
8) Orlando: 89,108
9) Dallas: 83,053
10) Boston: 74,834
11) Houston: 71,060
12) Phoenix: 67,863
13) Atlanta: 61,943
14) Seattle: 60,539
15) Denver: 54,610
16) Philadelphia: 49,178
17) Minneapolis: 46,362
18) San Diego: 45,297
19) Detroit: 43,113
20) Honolulu: 42,039
21) Tampa: 41,991
22) Portland: 32,116
23) Charlotte: 29,540
24) St. Louis: 28,035
25) Salt Lake City: 27,434

Quoting MIflyer12 (Reply 25):
They manage to survive internecine struggle because at 528sm they're nowhere near as close as IAD-EWR (212sm), CVG-DTW (229sm), or MEM-ATL (332sm). Proximity to another carrier's megahub is challenging; proximity to a mega-hub by your own carrier may be worse. MSP and DTW also survive by smart destination management; both have unique destinations in their respective geographies that couldn't be served by the other. I dare say that few people from DTW want to travel to Fargo often but MSP's global ag businesses help support eight n/s MSP-FAR today.

I agree, but your point is sort of irrelevant given that MSP and DTW have never been in conflict with each other since both hubs have been part of the same airline dating back to pre-deregulation era (NW Orient and Republic). So, in all honesty, that was never really an issue. Whereas, all of the other examples you mentioned (IAD/EWR, CVG/DTW and MEM/ATL) were all recent examples/casualties of mergers after 2008.

Quoting MIflyer12 (Reply 25):
The analyst's thesis has some traction. He didn't say walk away from all IAD connecting traffic - he said use bigger aircraft out of other hubs. DL does that to good effect: look at the mainline percentage of departures by DL@ATL vs. AA@DFW, AA/[email protected]CLT or UA@ORD. Bigger planes = lower CASM and less congestion for the same passenger volume. DL has claimed it leads to happier passengers and higher yields (overcoming the typical frequency premium).

From the summer 2014 fleet breakdown threads, I'm seeing:

DL at ATL = 77.6% mainline
AA at DFW = 65.9% mainline
AA/US at CLT = 44% mainline
UA at ORD = 30.4% mainline

I personally think a 11.7% difference between ATL and DFW isn't by and large a major distinguishing factor, especially also given AA's current fleet renewal program that is ongoing.

CLT I believe has more relevance, but again, its geographic location in a largely dispersed part of the country doesn't necessitate mainline flights to smaller markets in the SE region of the country.

Finally, UA at ORD is skewed simply because it competes with not just one, but two major domestic competitors (AA and WN) for competing traffic to similar markets. Sadly, you have UA sending RJs between ORD and EWR/LGA/MIA and so forth.

Sources:

AA Summer 2014 Departures By Hub And Aircraft Type (by FSDan May 26 2014 in Civil Aviation)

UA Summer 2014 Departures By Hub And Aircraft Type (by FSDan May 26 2014 in Civil Aviation)

DL Summer 2014 Departures By Hub And Aircraft Type (by FSDan May 26 2014 in Civil Aviation)
 
joeljack
Posts: 662
Joined: Fri Feb 25, 2005 12:38 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 9:54 pm

Point A:
Another point is once the metro train is completed to Dulles in 2019, this will also make it a ton easier and more attractive to get to Dulles. I know this is 5 years away but I would imagine this could be good boost to O/D traffic at Dulles.

Point B:
I've been waiting for 10 years for an OMA-IAD connection on UA. Right now connecting to the bank of Europe departures from IAD requires a double connection, very unattractive. (I just did it last month to GVA). Seems to me they could easily add 5-10 cities to IAD and increase their Europe feed. For example, US did this recently to CLT from cities like OMA, DSM, OKC, AUS and SAT. All have been up-guaged since they were added and many with additional flights now (OMA, AUS and SAT). I really don't understand why UA doesn't do this with Dulles from OMA and DSM.
 
AADC10
Posts: 1511
Joined: Sat Nov 13, 2004 7:40 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 10:01 pm

The analyst does not mention that EWR is slot restricted. ORD has been slot restricted in the past. Presumably UA could upguage the transatlantic 757s out of EWR to grow but IAD has available capacity and fewer delays than EWR. It is also UA's closest hub to the southeast, the big hole in their network.

If UA had to close a hub, they should look at LAX or DEN. While they both have a role in the network, at least their traffic could be shifted to other hubs that are unlikely to have slot restrictions anytime soon (SFO and IAH). At LAX, they have to maintain enough flights to occupy their gates because if they cut service too far, they will lose gates and never get them back due to the gate total restrictions.

The relationship between the 50 seaters and revenue is difficult to figure since they are all contracted out. They are dropping them as the contracts come up for renewal. Breaking the contracts would cost money and it is not clear that routes shifted back to mainline (with fewer frequencies) or larger UAX would actually have lower costs.
 
FlyPNS1
Posts: 5518
Joined: Wed Dec 01, 1999 7:12 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 10:02 pm

The fundamental difference between shutting down IAD and shutting down CLE, MEM, CVG, PIT, STL, etc is that if you shut down IAD, you can't easily absorb the traffic elsewhere. It was easy for DL to improve margins by shutting down MEM and CVG because DL could easily absorb the connecting flows at ATL/DTW.

However, if UA shuts down IAD, they will simply lose the traffic. All of the long-haul high-yield O&D from DC will NOT connect through EWR...they will just fly nonstop on foreign flag carriers to LHR, CDG, AMS, FRA, etc. As for the connecting traffic, EWR simply can't handle it. The airport is a basketcase on a good day. UA could upgauge to some degree but UA doesn't really have the aircraft on order to upgauge much and IAD is mostly 50 seaters so that won't help upgauge. If UA did consolidate to EWR, their entire system would go into chaos every time EWR has a problem...which is many days.

While consolidating EWR and IAD looks good on paper, it doesn't make sense operationally.
 
User avatar
Aaron747
Posts: 13331
Joined: Thu Aug 07, 2003 2:07 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 10:05 pm

Quoting bchandl (Reply 11):
Actually, Wall Street is full of the brightest business people in the world.

People that are a lot smarter than you or I.

Beg to differ. The brightest business people in the world innovate, reinvent old products, market the seemingly unmarketable, and build lasting relationships that survive incredible challenges. Not a lot of that going on in the halls of investment banks and M&A firms, quite honestly.

Quoting bchandl (Reply 11):
If everyone is so stupid that works there, yet they get paid quite nicely, why haven't you or I taken a job there?

Perhaps we have different ethics and values when it comes to handling the money of others. Or maybe that's just me. A thief or cheat paid nicely is working with soiled money, after all. I also have a low tolerance for petulance.

Quoting bchandl (Reply 35):
How does that qualify you to say anything? I'm thoroughly confused.

'Qualifications' are a fool's dependency. This is something most business people worth their salt learn and/or realize by mid-career (earlier if they're lucky).
If you need someone to blame / throw a rock in the air / you'll hit someone guilty
 
Bobloblaw
Posts: 2406
Joined: Fri Jan 13, 2012 1:15 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 10:21 pm

Quoting bchandl (Reply 11):
Actually, Wall Street is full of the brightest business people in the world.

People that are a lot smarter than you or I.

If everyone is so stupid that works there, yet they get paid quite nicely, why haven't you or I taken a job there? Can't be high expecations since we are all so stupid.

Wall Street is full of cronyism. Youd notice that everyone there comes from the same 10 or so schools. Try going to Wall Street from University of MN or University of Arizona.

BTW McAdoo is the brilliant brain who claimed AA lost money of MIA-EZE. He also is a guy who couldn't run a small airline successfully.
 
ScottB
Posts: 7213
Joined: Fri Jul 28, 2000 1:25 am

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 11:03 pm

Quoting toxtethogrady (Reply 37):
DCA will never be an international airport and will never be able to expand. This is as silly as all the people who claimed Malpensa would never make a good hub because Linate was closer to Milan.

Huh? AZ's attempt to hub at MXP failed precisely because the short-haul O&D traffic to Milan overwhelmingly prefers LIN. AZ has dropped the vast majority of the long-haul service it once offered from MXP and there has been no rush to replace it.

Quoting tugger (Reply 21):
I did say that Wall Street is full of stupid people. And it is, like most everywhere. The gentleman is putting forth a relatively simplistic analysis, one that does not capture the issue at hand fully compared to what airlines must consider across their business model.

I'm no fan of Bob McAdoo, but his analysis is not "relatively simplistic." He is correct in that IAD only achieves an O&D share of 20-30% in markets where there exists competing head-to-head service at DCA. He also notes that the vast majority of spoke markets at IAD see even weaker local traffic than the spoke markets at the now-defunct CLE hub did. IAD absolutely does compete with EWR for two of its key traffic flows -- transatlantic connections as well as intra-regional East Coast connections. There are two key flows for which IAD & EWR do not compete, and they are both beyond-perimeter local WAS O&D -- domestic & overseas. Unfortunately, the addition of perimeter exemptions at DCA is weakening the former.

It is fairly easy to imagine how the vast majority of traffic connecting at IAD could be flowed over EWR by increasing aircraft gauge at EWR. Consolidating 50-seat-and-under flights into 70-to-76-seat RJ's or mainline aircraft would lead to lower overall trip costs and a more competitive product at the expense of losing a modest amount of O&D traffic to & from IAD. Does it really make sense to fly three daily 50-seat RJ's between GSO and both IAD & EWR instead of one 738 and two E175's to just EWR? In the latter case, they'd lose out on maybe 4 or 5 O&D passengers on each IAD flight, but the product to EWR ends up being better and lower-cost.

Quoting airbazar (Reply 22):
Quoting commavia (Reply 7):
Not sure why Group VI aircraft would be all that relevant an issue one way or another for United.

Because IAD is LH's primary TATL connecting hub where they operate Group VI aircraft to, and UA and LH have a TATL JV. And it's not inconceivable that in the future UA will also order the 777X.

Um yeah, UA should keep a hub open just because LH might operate one or two daily A380's or 747-8's in peak season. I guess that means they should reconsider the JFK & MIA hubs, too.

Quoting solarflyer22 (Reply 33):
IAD is also where UA picks up a fair amount of government officials, armed forces members and contractors. Everyone on the gov tab has to fly a US carrier so might as well get some of that cheese.

The key question here is whether the the additional revenue realized by UA from WAS O&D at IAD is actually worth the cost of operating two hubs with more costly 50-seat aircraft. By dehubbing CLE, UA obviously walked away from some amount of O&D traffic, too, but it was determined that the costs of the hub at CLE were higher than the marginal revenue realized.

Quoting avek00 (Reply 2):
And IAD has a problem of being undersized, not too large.

IAD will always be undersized unless/until DCA can no longer serve sufficient O&D traffic in the markets within the perimeter. And paradoxically, the Silver Line may actually weaken IAD in the short term by providing an attractive public transit link to DCA from Tyson's/Reston.
 
IADLHR
Posts: 612
Joined: Wed Apr 27, 2005 10:25 pm

WallStreet To UA: Close IAD Part 1

Thu Jun 26, 2014 11:18 pm

Quoting ScottB (Reply 52):
IAD will always be undersized unless/until DCA can no longer serve sufficient O&D traffic in the markets within the perimeter. And paradoxically, the Silver Line may actually weaken IAD in the short term by providing an attractive public transit link to DCA from Tyson's/Reston.

From Tysons Corner to DCA on the Silver Line will require a change to the Blue or Yellow line. On the other hand from downtown DC, MD and anywhere the Orange line runs the Silver Line will be direct to IAD. That change of trains can discourage people from taking Metro as it can be a headache especially in rush hour.Been there and done that more times than I care to count.

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