UA CEO: Eliminate Intl F Class, No A380, Maybe 77X

LAXintl · Fri Jul 17, 2015 5:39 pm

United CEO Smisek sat down for an interview with a corporate travel magazine and had a few things to say.

Besides complaining about the ME3, here are some of the more interesting quotes:

International First Class:
“It’s a money loser, and we will be eliminating it over time. For example the 767s that have it today, as they get retrofitted you will not see it reappear. The problem is that it takes a lot of real estate, and people are not willing to pay for that. I suspect the other carriers, apart from the subsidised Gulf airlines, would say the same thing.”

On A380s:
One aircraft he won’t be buying is the A380. “That is a product for state-subsidised airlines, or airlines that have it and wish they didn’t,” he says.

77W replacing remaining 744s and maybe 77X in the future;
Over time B777-300ERs will replace the airline’s B747s, and while the B777X is not on order, it is a “potential product for us.”

More potential China secondary routes:
China is an important market for United, says Smisek – and what’s helping the airline expand there is new aircraft technology. “United is the largest US carrier to China by far, twice our competitors. We recently started San Francisco to Chengdu. That’s a so-called secondary city – secondary cities in China have 8-10 million people – and we’re able to do this because of the efficiency of the B787, and take that commercial risk. Non-stop into city that’s never had service from US carrier. If it works, it will open up a number of other secondary markets – I can’t say which ones, we don’t want to leak that information to the competition. Aircraft like the 787 enable us to fly to destinations we otherwise wouldn’t.”

Full story and interview:
http://buyingbusinesstravel.com/feat...-president-and-ceo-united-airlines

=

Hopefully this puts to an end to the discussions of what the future of F-class and the A380 hold at United.

gkirk · Fri Jul 17, 2015 5:42 pm

Quoting LAXintl (Thread starter):
On A380s:
One aircraft he won’t be buying is the A380. “That is a product for state-subsidised airlines, or airlines that have it and wish they didn’t,” he says.

Could some airlines take that as libel?

SonomaFlyer · Fri Jul 17, 2015 5:48 pm

Quoting gkirk (Reply 1):

Could some airlines take that as libel?

LoL no. It's an opinion and he's entitled to his own opinion as to the status of the ME3 in terms of backing from their governments (or not).

It's clear F class is going away and likely should've gone away sooner rather than later since UA failed to make the business case as to why F class was worth the extra money. Clearly they were not interested in putting the food, wine or personal attention into a realm where the price difference would be justifiable. In addition, the Great Recession drove a stake through the first class market on most routes. UA has a few that might sustain it but not enough to warrant keeping F class. They can expand their C class and Y class to fill up the space and pack em in tight.

FlyBigDeltaJets · Fri Jul 17, 2015 5:54 pm

What's the real difference between F and J in the context of international flying? In this particular case, what makes UA F class a "more premium" product than, say, DL J class?

adamblang · Fri Jul 17, 2015 5:57 pm

Quoting LAXintl (Thread starter):
Hopefully this puts to an end to the discussions of what the future of F-class and the A380 hold at United.

It won't. The "future of F" and the "A380 at United" threads will merge into the "Jeff should go" threads with the one being requisite for the other. Yeah sure

[Edited 2015-07-17 10:58:19]

thekorean · Fri Jul 17, 2015 5:59 pm

Quoting gkirk (Reply 1):

Its probably a shot at ME3 but it could also apply for Malaysian and Singapore if you think about it.

lightsaber · Fri Jul 17, 2015 6:05 pm

Quoting LAXintl (Thread starter):

Wow... Considering EK is the source of funds for Dubai....

I personally believe QR wouldn't survive an audit. With EY, the substantial "investment" that has been "re-invested" in the equity alliance probably would cause restrictions to be placed on the.

But EK must make a profit for Dubai to survive. If the largest A380 operator isn't subsidized...

For the record, the A380 does not belong at EK. The A380 works best at transfer hubs that help fill the Seats.

I'm off the opinion that EK requires a 4 seat first class for most of their routes with first. First works if you have a product good enough to entice customers not to charter a Gulfstream. I'm not thinking UA was offering that product.

Lightsaber

thekorean · Fri Jul 17, 2015 6:08 pm

Quoting lightsaber (Reply 6):

If you can make more money with J and Y instead of more first, you do it.

toxtethogrady · Fri Jul 17, 2015 6:08 pm

Smisek needs to deal with the "summer from hell". United has really screwed the pooch with its customers:

http://www.bloomberg.com/news/articl...-united-s-summer-from-airline-hell

VC10er · Fri Jul 17, 2015 6:13 pm

It is sad as United, long ago, had an F class worth paying for when they were a true 747 airline. Ice sculptures and caviar and Chateaubriand cooked to you liking and carved at your seat. (that was 20 years ago)

The current F seat is far superior to any all access J seat on a US3 (maybe not better than the new AA first class seat), but not enough better when they finally introduce the NEW United Business First seat. If an ULH has just 2 classes using the current climb over seat, then F is needed IMHO. Especially to keep their big spenders and corp Global Services fliers happy in the short term.

Gosh, when are they going to unveil that NEW J product????

STT757 · Fri Jul 17, 2015 6:15 pm

Quoting LAXintl (Thread starter):
77W replacing remaining 744s and maybe 77X in the future;
Over time B777-300ERs will replace the airline’s B747s, and while the B777X is not on order, it is a “potential product for us.”

I think the 77W replacing the 744 quote might be taken out of context, during the last earnings call they discussed the 77W replacing sCO 777-200ERs from EWR, which in turn would replace 10 sUA 3 class non ER 777-200s which would transition to domestic service. The 744s were mentioned to soldier on until the end of the decade and be replaced by the A350-1000.

thekorean · Fri Jul 17, 2015 6:15 pm

And then Americans decided to cheap out and not pay for better product. Smisek is responsible for lots of garbage but quality of customers is out of his hand. Americans are cheap now. Gotta adjust.

Quoting VC10er (Reply 9):

ap305 · Fri Jul 17, 2015 6:17 pm

Surprising that Smisek does not mention the 35 a350s on order when talking about the future fleet.

winGl3t · Fri Jul 17, 2015 6:19 pm

Quoting thekorean (Reply 5):
Its probably a shot at ME3 but it could also apply for Malaysian and Singapore if you think about it.

Add TG, AF, CZ.

cosyr · Fri Jul 17, 2015 6:24 pm

Quoting LAXintl (Thread starter):
I can’t say which ones, we don’t want to leak that information to the competition.

Nice reference to the anti trust investigation...

Quoting LAXintl (Thread starter):
Over time B777-300ERs will replace the airline’s B747s

This is what I suspected. Some believe they are for growth, but with oil so low, I think it is just a delayed one-for-one.

wingman · Fri Jul 17, 2015 6:28 pm

Well at least he's not pouring cold water on the 380, at least I didn't see his lips move synched up with those words so it could just be another bs misinterpretation.

As for F Class at UA it's a lot of catch-22 with the frequent flyer club. It's real estate consumed by upgrades and miles, all revenue earned long ago. Get rid of that and install a good enough J class and that's your new first. Y+ with one less seat per row at 19" and 36" legroom is your new J class and the new economy they can just drop all pretense and call it Guantanamo class.

StrandedAtMKG · Fri Jul 17, 2015 6:29 pm

Quoting thekorean (Reply 11):
And then Americans decided to cheap out and not pay for better product. Smisek is responsible for lots of garbage but quality of customers is out of his hand. Americans are cheap now. Gotta adjust.

No. Americans are making less money for their work than they were years ago. The airlines' business model is built on tons of people traveling all the time and spending lots of money on that travel, and the money just isn't there for most people. An overseas vacation is a once-in-a-lifetime opportunity for many Americans and a complete and total impossibility for many. "Americans are cheap now" because they have to be.

32andBelow · Fri Jul 17, 2015 6:30 pm

Quoting thekorean (Reply 11):

And then Americans decided to cheap out and not pay for better product. Smisek is responsible for lots of garbage but quality of customers is out of his hand. Americans are cheap now. Gotta adjust.

Maybe more people just want to not spend 5 figures for a few hours of their lives. Rich people aren't dumb.

[Edited 2015-07-17 11:31:11]

Byrdluvs747 · Fri Jul 17, 2015 6:33 pm

Wow!!! So AA will be the only US carrier with an intl F cabin.

Quoting thekorean (Reply 5):
Its probably a shot at ME3 but it could also apply for Malaysian and Singapore if you think about it.

... and Air France.

ripcordd · Fri Jul 17, 2015 6:37 pm

The new 3 class is J/Y+/Y there isn't much btwn F & J now most airlines.....

Byrdluvs747 · Fri Jul 17, 2015 6:40 pm

Quoting ripcordd (Reply 19):
there isn't much btwn F & J now most airlines.....

Apparently not at United.

WPIAeroGuy · Fri Jul 17, 2015 6:49 pm

Quoting 32andBelow (Reply 17):
Maybe more people just want to not spend 5 figures for a few hours of their lives. Rich people aren't dumb.

I think this is an excellent point that is often overlooked. It's one thing to buy a $50K Audi instead of a $25K Toyota, because you will drive that car every day for years. 8 hours in a fancy chair for 10x the price of a normal chair is extremely difficult to justify without loads of disposable income.

Rdh3e · Fri Jul 17, 2015 6:50 pm

Quoting Cosyr (Reply 14):
Nice reference to the anti trust investigation...

Huh? That comment had nothing to do with that. He's saying he doesn't want to reveal what cities they might fly to in order to prevent the competition from getting the jump. No one announces their plans before they're ready to launch, that would be stupid.

cosyr · Fri Jul 17, 2015 6:56 pm

Quoting Byrdluvs747 (Reply 18):
Wow!!! So AA will be the only US carrier with an intl F cabin.

We'll see. Soon AA will only have it on the 77W, UA will only have it on some 77E and 744's that are already one foot out the door. Just because AA put it on a newer plane doesn't mean they won't strip it out before UA retires the last of their F planes. I think AA's new F seat was an experiment to see if an upgraded product could command a higher dollar.

But who knows, maybe if they're the only US airline to offer it, they will capture the entire niche market of customers, and they alone can be profitable by it. For me, J is good enough today, that I couldn't see even paying the copay to upgrade to it from J. J hard product today is better than F hard product was 20-30 years ago, and you can't get 20-30 years ago service anywhere, so what does it matter?

Clipper101 · Fri Jul 17, 2015 7:11 pm

B777X !!! what model he is talking about exactly: -8 or -9? If he is not so confident about the A380 how would he be so upbeat about filling the -9, does not make sense.

Boeing778X · Fri Jul 17, 2015 7:13 pm

No A380 for UA, or any U.S. airline, and I highly doubt any 777X order.

strfyr51 · Fri Jul 17, 2015 7:14 pm

Quoting gkirk (Reply 1):

Could some airlines take that as libel?

they can take that as OPINION !!

What?! Now nobody can have an Opinion unless you like it?
Opinions are like Noses. Everybody has one

LAXintl · Fri Jul 17, 2015 7:18 pm

Quoting Clipper101 (Reply 24):
If he is not so confident about the A380 how would he be so upbeat about filling the -9, does not make sense.

Big difference between the 77X and A380.

The A380 would be a 500+ seater at UA (546 to be exact per study). The 777-9 barely 400.

United today puts 374 on the 744 and has no problem filing it, so an efficient 400 seater does have a place in the network.

strfyr51 · Fri Jul 17, 2015 7:29 pm

Quoting STT757 (Reply 10):

Let's clear this so there will BE No mistake. United is NOT going to be getting the 747-8I or the A380 as long as this "Regime" is in Town
How long they're in town?? Nobody can say. Might be for years? might be for Months. Chances are? For Years !!
I don't see anybody on the Horizon. So? The B747 is on it's way out and the B777 and A350 are on the way IN.
The new B777's and A350's and B787's (-10's) were slated to replace the B747's way back during Bankruptcy under the Tilton Regime.
Jeff is saying Truth (except for the opinion which I don't necessarily agree with) and just to be candid, I DO work for UNITED and I AM a shareholder.
r.

UA444 · Fri Jul 17, 2015 7:32 pm

No, Jeff, most airlines wouldn't say F is a loser. AA, LH, BA, NH, JL, SQ, CZ and other so called "non subsidized" non ME carriers all have F and will continue. You not knowing how to compete and make a competitive product doesn't mean the other airlines are as bad as you.

And his posturing about how UA is a "market leader" reeks of the same delusion the DTW automakers have about their cars being competitive with foreign automakers. Now that I think of it, Smisek would fit in really well at GM.

[Edited 2015-07-17 12:37:39]

Revelation · Fri Jul 17, 2015 7:32 pm

Quoting LAXintl (Reply 27):
The A380 would be a 500+ seater at UA (546 to be exact per study). The 777-9 barely 400.

United today puts 374 on the 744 and has no problem filing it, so an efficient 400 seater does have a place in the network.

Do you have similar numbers for A350-900 and A350-1000?

Byrdluvs747 · Fri Jul 17, 2015 7:37 pm

Quoting Cosyr (Reply 23):
But who knows, maybe if they're the only US airline to offer it, they will capture the entire niche market of customers, and they alone can be profitable by it.

Thats what I was wondering. Without UA in the F game, maybe AA can lure more executive level corporate and A-List celebrity travel.

Quoting 32andBelow (Reply 17):
Maybe more people just want to not spend 5 figures for a few hours of their lives. Rich people aren't dumb.

If spending five figures on a flight is dumb, then there are plenty of dumb rich people spending that on private jets. Trump must spend six figures flying his 757 to Europe.

32andBelow · Fri Jul 17, 2015 7:41 pm

Quoting Byrdluvs747 (Reply 31):
If spending five figures on a flight is dumb, then there are plenty of dumb rich people spending that on private jets. Trump must spend six figures flying his 757 to Europe.

A private jet operating from and to airports with no commercial service at any time is totally different. We are talking about the marginal cost between J and F which is probably not worth it to almost everyone.

LAXintl · Fri Jul 17, 2015 7:42 pm

Quoting UA444 (Reply 29):
most airlines wouldn't say F is a loser. AA, LH, BA, NH, JL, SQ, CZ and other so called "non subsidized" non ME carriers all have F and will continue.

Industry wide the F cabin's are shrinking or being eliminated entirely.

AA will only have product on a single type, LH is in process of eliminating the class on host of aircraft including 744, BA has shrunk the cabin and taking some models like 788 sans F class, NH & JL only have F on 777s, SQ cabin has shrunk and not available on all widebodies, and CZ is hardly an industry yard stick when it comes to premium products.

Quoting Revelation (Reply 30):
Do you have similar numbers for A350-900 and A350-1000?

They showed -900 at 284 and -1000 at 331.

ThReaTeN · Fri Jul 17, 2015 7:48 pm

Regarding the A380 comment: I'm not sure which airlines he stuffs into which category, but if he is implying that BA, LH, SQ, AF etc. are all state subsidised airlines, then that's a rather rich comment to come from the US3 with their history of Chapter 11 protection from their creditors. In fact, it's nausea inducing.

UA444 · Fri Jul 17, 2015 7:50 pm

Quoting LAXintl (Reply 33):

Doesn't matter, they all still see the value in it and will continue to offer it on some routes and some part of their fleet. Smisek from day 1 was against it and he was against E+ and saw no value in it at CO until he came in to UA and was shown that it does work. I agree UA has too many planes with F but there is a market. The problem is that they have fulfilled their self-fulfilling prophecy by neutering the product to the point most don't want to pay full price for it.

And his delusion about retrofitting 763s with a "world class" outdated C seat is the most hilarious thing in the world. These guys don't have a clue and thier operational reliability is in the toilet this summer. Is that EK and QR's fault too?

thekorean · Fri Jul 17, 2015 7:51 pm

Quoting ThReaTeN (Reply 34):

Thats not state subsidy, its not paid for by tax payers. Its part of legal system.

LAX772LR · Fri Jul 17, 2015 7:54 pm

Quoting LAXintl (Thread starter):
secondary cities in China have 8-10 million people

...and 7.9 to 9.9million of them probably couldn't afford bus fare, let alone intercon airfare.

China has a rapidly growing middle class, but to state a central city's population as if it (even remotely) correlated to travel patterns of a first-world city of similar magnitude is a fallacious comparison.

Quoting 32andBelow (Reply 17):
Rich people aren't dumb.

You obviously don't spend enough time around rich people, if you believe THAT.

Quoting Cosyr (Reply 23):
J hard product today is better than F hard product was 20-30 years ago

Hell, I'd say better than it was even ten years ago.

Quoting Clipper101 (Reply 24):
If he is not so confident about the A380 how would he be so upbeat about filling the -9, does not make sense.

How exactly. More than 100seat difference, and the 779 would be able to fit into class-E gates (of which all of UA's hubs have sufficient number) versus the A380 in F-gates only (have fun with that at LAX and ORD).

Quoting UA444 (Reply 29):
No, Jeff, most airlines wouldn't say F is a loser

Based on what?

The777Man · Fri Jul 17, 2015 7:55 pm

I think if you make a F cabin with service to match, people ARE willing to pay for it, at least to Asia and Australia. Lot of First class travelers have switched to business jets but Asia is a bit far for many travelers in business jets.

Quoting Boeing778X (Reply 25):
No A380 for UA, or any U.S. airline, and I highly doubt any 777X order.

He was just quoted above saying the 777X is a potential aircraft for UA. That sounds very positive to me!

The777Man

Gasman · Fri Jul 17, 2015 7:57 pm

Quoting FlyBigDeltaJets (Reply 3):
What's the real difference between F and J in the context of international flying?

Well, it depends on the airline and product of course. On SQ, the difference between J and F is significant, and worth the extra money. Truly luxurious food and alcohol, more space, pretty much 1:1 attention and you're unlikely to have a full cabin.

In EK......... not so much. You definitely get more room, but somehow it manages to feel like room you don't want or need. The showers are a very nice touch. Food is superior to J, but one kind of gets the impression that it's J food just with caviar added. And service, as for all classes on EK, can be haphazard. But then, the price differential between J and F on EK occasionally is not that great - making it a potentially attractive proposition.

Quoting wingman (Reply 15):
Get rid of that and install a good enough J class and that's your new first.

The key is "good enough J class". When NZ got rid of first over a decade ago, J probably was good enough to replace it - at least in the context of the time. Now, however, J is an overpriced and somewhat cramped affair - there has been a definite unrelenting creep towards mediocrity that I doubt would have existed had F still been a feature of the airline.

AABB777 · Fri Jul 17, 2015 7:58 pm

Quoting LAXintl (Thread starter):
International First Class:
“It’s a money loser, and we will be eliminating it over time. For example the 767s that have it today, as they get retrofitted you will not see it reappear. The problem is that it takes a lot of real estate, and people are not willing to pay for that. I suspect the other carriers, apart from the subsidised Gulf airlines, would say the same thing.”

On A380s:
One aircraft he won’t be buying is the A380. “That is a product for state-subsidised airlines, or airlines that have it and wish they didn’t,” he says.

Once again the US3 (Smisek) are long on rhetoric and short on specifics when it comes to claims of ME3 subsidies.

JoeCanuck · Fri Jul 17, 2015 8:01 pm

Quoting SonomaFlyer (Reply 2):
It's clear F class is going away and likely should've gone away sooner rather than later

J has been becoming more opulent all the time, really pushing into F territory, (and way past J of a decade ago). There really doesn't seem to be much that F has that J doesn't...maybe a service thing but not much more.

Y has pretty much stayed the same...with maybe less space and new thin seats allowing even more passengers to be cattle crammed into the pen.

That has created quite a large gap between J and Y, so along comes Y+, basically a budget J.

Y is still Y, Y+ is where J used to be and J is way past where F used to be. With J so good, I suspect F is getting to be a tough sell.

ThReaTeN · Fri Jul 17, 2015 8:04 pm

Quoting thekorean (Reply 36):
Thats not state subsidy, its not paid for by tax payers. Its part of legal system.

I realize that, but why aren't all American companies that declare bankruptcy shielded from their share and bond holders (and freed from other obligations, such as pensions to employees) and allowed to restructure instead of being liquidated? If the US3 were awarded special treatment by the legal system because they are considered to be of extraordinary importance to the economy or society, that could very well be considered a form of state subsidy.

JAAlbert · Fri Jul 17, 2015 8:11 pm

Quoting LAXintl (Thread starter):
On A380s:
One aircraft he won’t be buying is the A380. “That is a product for state-subsidised airlines, or airlines that have it and wish they didn’t,” he says.

Yikes! Not a very positive comment. The "state subsidized" airline comment is gratuitous and unnecessary. The comment about other airlines wishing they hadn't ordered the 380, however, is intriguing -- especially coming on the heels of SIA CEO wishing the 380 were "better" I think is the word he used. I imagine Smisek is informed to some degree about other airlines' experience with their aircraft and MAS and AF (and Thai?) have all expressed concern in the past about the viability of the 380 in their fleet. I'm not interested in starting a flame war, but the comment raises anew the questions about the 380.

Quoting thekorean (Reply 11):
Americans are cheap now.

Yeah and the F class tickets for Mr. and Mrs. Ordinary Joe are simply unaffordable. Hell, most couldn't pay the cost of a business class ticket, let alone first. My partner and I flew to BCN in May. Business class tickets on AA were $4500 each, meaning $9000 spent before we left San Diego. Maybe someday I'll have more money than I need and can drop $9000 for tickets, but right now spending that kind of money on airfare is just not in the budget. Most premium cabins are paid for by business, or I suppose upgrades.

United1 · Fri Jul 17, 2015 8:13 pm

Quoting ThReaTeN (Reply 42):
I realize that, but why aren't all American companies that declare bankruptcy shielded from their share and bond holders (and freed from other obligations, such as pensions to employees) and allowed to restructure instead of being liquidated?

What companies would those be that can not use CH11? AFAIK any US company can take advantage of CH11....

spacecadet · Fri Jul 17, 2015 8:17 pm

Quoting JoeCanuck (Reply 41):
With J so good, I suspect F is getting to be a tough sell.

If F goes away, then some airline is going to need to take the bold step of renaming J to F. They'd sell more seats, I guarantee it, as long as they were semi-transparent about what they were doing. ("Our business class is so good, we're renaming it first!" or something.) But people like the status that flying F gives them - they like to say to their friends that they fly first class. Even if the prices are much lower and the service not quite as good as what F today has become (because this newly renamed "F" is what we'd call J today), some people still want to say they "only fly first". And they'd be able to say that for a lot less money if J were just renamed F.

trex8 · Fri Jul 17, 2015 8:18 pm

Quoting United1 (Reply 44):
Quoting ThReaTeN (Reply 42):
I realize that, but why aren't all American companies that declare bankruptcy shielded from their share and bond holders (and freed from other obligations, such as pensions to employees) and allowed to restructure instead of being liquidated?

What companies would those be that can not use CH11? AFAIK any US company can take advantage of CH11....

Lehman Brothers, GM, Chrysler, Enron, Washington Mutual, even Texaco have gone through Chap 11.

a318 · Fri Jul 17, 2015 8:22 pm

Quoting LAXintl (Thread starter):
non-stop into city that’s never had service from US carrier. If it works, it will open up a number of other secondary markets – I can’t say which ones, we don’t want to leak that information to the competition. Aircraft like the 787 enable us to fly to destinations we otherwise wouldn’t.”

Naming secondary markets in China is considered leaking information to the competition? Look at Finnair's network and you'll see a bunch of secondary Chinese cities. It's no secret that the demand is there.

speedbored · Fri Jul 17, 2015 8:28 pm

Quoting gkirk (Reply 1):

Could some airlines take that as libel?

Very unlikely. Libel needs to be against a person. In any case, he didn't name names.

But I suspect that his A380 comment will not win him any friends in Toulouse when it comes to his next RFP

Clipper101 · Fri Jul 17, 2015 8:30 pm

Quoting LAXintl (Reply 27):
Big difference between the 77X and A380.

The A380 would be a 500+ seater at UA (546 to be exact per study). The 777-9 barely 400.

United today puts 374 on the 744 and has no problem filing it, so an efficient 400 seater does have a place in the network.

I agree passenger counts up 400 should not be challenging for an airline with a network like that of UA. I do not know the study you are talking about, but I know B779 is advertised to be around 450 in 3 classes (not barely 400 as you stated), given that UA is not tempted with F/C then I would expect that number to rise to around 500, still lots of seats to fill. That is unless he more means the -8 when he talks B777X, in this case -8 looks to me more inline with the barely 400 passenger count you stated. There is one comonality between B779 & A380, both are huge airplanes.

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