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klwright69
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Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:29 pm

Here is an interesting article.

http://realmoney.thestreet.com/artic...ould-united-be-stronger-if-divided

I think this article has a misleading headline, and I think the underlying idea is not sound.

[Edited 2016-04-28 10:38:33]
 
jetmatt777
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:33 pm

I don't think there are any successful examples of shrinking to profitability in the airline business. We are profitable. Just not on the same profit level as Delta.
 
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enilria
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:38 pm

UA is profitable.

The only thing they should consider closing is IAD, but frankly they need to grow in places like LAX and EWR or risk irrelevancy in the long term.
 
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diverdave
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:41 pm

Quoting jetmatt777 (Reply 1):
I don't think there are any successful examples of shrinking to profitability in the airline business. We are profitable. Just not on the same profit level as Delta.

I think the article makes some good points about the future of the operations at IAD, LAX, and DEN.

David
 
B747forever
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:44 pm

Quoting enilria (Reply 2):
The only thing they should consider closing is IAD, but frankly they need to grow in places like LAX and EWR or risk irrelevancy in the long term.

Well it looks like UA has given up on LAX while DL and AA continue to grow. I guess they dont need LAX as badly as AA/DL because they have SFO.
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klwright69
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:46 pm

I think the story made an odd point about UA having too many coastal hubs. That's a new one to me. DEN and ORD are huge in their system.
 
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exunited
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:50 pm

Wow, there goes 5 minutes of my life wasted reading that article. What a brilliant new suggestion by the author that they should get rid of the 747s and small RJs, something that has been going on for a long time already. And close Dulles, yawn... hasn't that been discussed ad nauseum already. What kind of business closes a profitable operation in order to hand it over to one of your competitors? You don't think AA or DL would jump on the international routes immediately?

Dumb, so dumb. Who are these experts anyways, from the sound of it he must one of the A-Net armchair CEO know it alls.
 
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exunited
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 5:56 pm

Quoting enilria (Reply 2):
The only thing they should consider closing is IAD

Please enlighten us as to why they should do that and close a profitable hub.
 
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LAXintl
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 6:11 pm

Yes United needs to do something. Whether its shrinking, selling assets or major network juggling.

Lets see what grand ideas they present at their June event.

Hubs specifically, in many ways UA maybe has too many - 3 midcon, and 2 on each coast rather near to each other.
UA also has a hub and service gap in the economically ever more important Southeast as well.

Quoting exunited (Reply 7):
Please enlighten us as to why they should do that and close a profitable hub.

I would be careful how IAD is characterized. The hub has continually had profit issues going back to 2002 and the BK.

The hub has never achieved the critical mass it needed including key domestic north-south connectivity to make it a true success. For the most part the hub was a part-time East-West hub.
There are probably lots of valid excuses including the airports high cost, the inability to offer enough volume, local issues with competition from DCA etc that have caused headwinds.

Now post merger, the viability of IAD is even more questionable, when you have a global hub in a much larger local market only 200 miles to the North.
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Italianflyer
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 6:14 pm

Hunter Keay is a shill for activist investors who want to "unlock shareholder value" which is code for divest assets and use the cash to pump stock vis a vis buybacks. The fact that he forgot a couple mid-continent hubs is glaring.
Let the new management team put together a coherent strategy before throwing the baby out with the bath water.

Apple reported their first drop in iPhone sales this week. I don't see people writing their obitiary. This kind of nonsense and noise drives me nuts.
 
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 6:25 pm

Quoting LAXintl (Reply 8):
Hubs specifically, in many ways UA maybe has too many - 3 midcon, and 2 on each coast rather near to each other.
UA also has a hub and service gap in the economically ever more important Southeast as well.

Could make a similar statement about DL. They have 2 West Coast Hubs (LAX/SEA), 3 mid-con hubs (DTW/MSP/SLC), 3 east coast hubs (ATL/LGA/JFK) using a little latitude on "coast" on the east.

You could also make a similar statement about AA. They have 1.5 west coast hubs (LAX/PHX), 2.5 mid-con hubs (DFW/ORD/PHX), and 6 east coast hubs (CLT/DCA/LGA/JFK/MIA/PHL).
 
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 6:42 pm

Quoting jetmatt777 (Reply 1):
I don't think there are any successful examples of shrinking to profitability in the airline business.

During the recent bankruptcy cycle, they all shrank to profitability. The idea that it can't be done is a labor canard.

Quoting Italianflyer (Reply 9):
Hunter Keay is a shill for activist investors

You're being too kind.   I'd also accuse him of poor analysis and "hip-shooting" with his write-ups.
 
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OA412
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 6:47 pm

I'm a bit perplexed by the line in the article suggesting Denver is "plagued" by weather issues. That's certainly not the case. Yes there are the rare occasions when the airport is closed, as occurred last year, but the airport is well equipped to deal with most of the snowstorms that come through the area. And yes, there are sometimes delays in summer due to thunderstorm activity, but that's really no different than many of the Southern and Eastern hubs.

Quoting LAXintl (Reply 8):
Yes United needs to do something. Whether its shrinking, selling assets or major network juggling.

Indeed. I think it's abundantly clear by now that what is currently in place simply isn't working, at least not as well as DL or AA. UA has a lot of strengths, yet they continue to under perform their two main rivals. Something clearly needs to give.

Quoting LAXintl (Reply 8):
I would be careful how IAD is characterized. The hub has continually had profit issues going back to 2002 and the BK.

Indeed. Most indications over the years suggest that it's not been a mostly unprofitable or perhaps marginally profitable hub for UA.
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LAX772LR
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 6:51 pm

Quoting B747forever (Reply 4):
Well it looks like UA has given up on LAX

Not sure how near-hourly service to every one of their hubs, plus every major domestic leisure market, plus longhaul nonstops to LON/TYO/SYD/AKL/PVG.... constitutes "giving up."


Quoting LAXintl (Reply 8):
The hub has never achieved the critical mass it needed including key domestic north-south connectivity to make it a true success.

   Though, as stated, much of that isn't UA's fault... but for the existence of DCA.
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MSPNWA
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 7:06 pm

For UA with their highly competitive hubs and markets, shrinking will simply lead to less market share and less profit. They can't shrink to profitability.
 
jetmatt777
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 7:07 pm

Quoting MasseyBrown (Reply 11):
bankruptcy cycle, they all shrank to profitability. The idea that it can't be done is a labor canard.

If everyone is shrinking and filing BK, sure. When your competitors are growing and competition is heating up, shrinking in the sector is not a wise decision.
 
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TWA772LR
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 7:08 pm

They can "start" by retiring older aircraft? Ummm, buddy they're already doing that. Let your assets depreciate more by the time their replacements come in for the added tax write-off. The 747s are old, but it's not like they're falling apart and you can't just retire and replace a plane overnight.

Yes, most of the UA hubs are not fortress hubs, but the markets that they are in clearly can support UA, as evidenced by the only hub closure post-merger was CLE. The only one they can stand to lose is the quasi-hub at NRT, which as as stop-over point has become irrelevant with newer generations of aircraft.

And IAD maybe 30 miles from DC itself (IAH is 28 miles from downtown Houston and I've heard it's easier to get to the Golden Gate by flying into OAK instead of SFO sometimes), but how is UA going to expand in DCA? It's more physically constrained than EWR! They only way for DCA to expand is to divert the Potomac and reclaim the land! The fact that IAD hasn't had a rail line for so long (should be coming soon), isn't UAs fault. And how would you expect a 777 to takeoff to PEK at DCA? DC is a big enough and lucrative enough market to maintain a hub there. Tons of government traffic, tons of young professionals, and even a good catchment area with Northern VA and even as far as Baltimore if you want more destination options.

Quoting LAXintl (Reply 8):
I would be careful how IAD is characterized. The hub has continually had profit issues going back to 2002 and the BK

You're right, but it also depends on how the hub is operated. You could have a massive hub in Tokyo, LA, or London and fly to all corners of the globe and still fail miserably. Who would've thought that the likes of PHX, MSP, and CIN would be hubs back in the early days of commercial aviation? The trick is is that they are run properly. And UA has done a lot of good job of cleaning up it's operational issues.
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STT757
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 7:09 pm

Quoting enilria (Reply 2):
The only thing they should consider closing is IAD,

That's the only one to consider, whether adding resources and capital to the hub would change it's equation. Would investing $2 Billion into a new concourse, and whether dedicating more of the new ERJ-175s and 73Gs on order to grow their domestic network from the hub would have meaningful return or would that money be better spent elsewhere?

EWR's Terminal C is getting up there in age, the main ticket/baggage building was built in the late '70s. The C-1 and C-2 concourses opened in 1988 and the C-3 concourse was opened in 2001. I think instead of investing in a new C/D concourse at IAD I think they should invest in new facilities at EWR, at least replacing the main Terminal structure to compliment C-3, and perhaps updating or replacing their ORD facilities.


Quoting enilria (Reply 2):
but frankly they need to grow in places like LAX and EWR or risk irrelevancy in the long term.

Of all the US carriers the carrier that would be able to make Dulles work would be AA, because it has DCA which means it can realize synergies between the two airports and grow their frequent flier pool. Push the regional traffic through DCA and the International through Dulles. I don't think any one is going to make Dulles competitive with DCA's within the perimeter routes. Which is why B6 and WN have shrunk, not grown at IAD. It's wide open, and has plenty of runway capacity for expansion but the fact that no one is trying to take advantage of that and UA's hesitance to grow IAD speaks volumes.

I mentioned this in a thread a few months back and still feel the same way, I wish there were a deal AA and UAL could work out that would see UA transfer the IAD hub to AA in exchange for something else. What that is I do not know, otherwise UA could just close IAD and let AA move in free of charge. Would AA give up ORD for IAD, or CLT?
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commavia
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 7:16 pm

Quoting Rdh3e (Reply 10):
6 east coast hubs (CLT/DCA/LGA/JFK/MIA/PHL)

I continue to think this characterization is largely a red herring.

LGA and JFK are "hubs" in the marketing sense and JFK is optimized for limited, specialized connections (largely afternoon/evening connections to/from Europe). MIA is certainly a "megahub" but its connectivity is near-entirely geared towards linking the U.S. with Latin America and the Caribbean, with, again, limited domestic connectivity.

AA's true "hubs" on the east coast are PHL, CLT and to an obviously smaller extent DCA. I don't think AA has "too many" hubs in the eastern U.S., and indeed I actually think AA's overall network benefits from having such a dense coverage and critical mass in the region. I think the key for AA, which may - may - be the issue for United is that while AA definitely does have heavy coverage in many large markets in the eastern U.S., each of these "hubs" serves a fairly distinct and unique role. Case in point: CLT and MIA are relatively close, but serve dramatically different network roles. Same with PHL and JFK - they're less than 100 miles apart but cater to quite distinct traffic flows and O&D.
 
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 7:40 pm

Think about it this way, what hubs serve what purpose:

ORD - UA's jack of all trades hub. Lots of service to Asia, Europe, and heavy domestic coverage
IAH - UA's gateway to Latin America. Heavy domestic coverage and healthy European coverage
DEN - UA's gateway to the Rockies and major east/west domestic connector. Heavy domestic coverage.
EWR - UA's gateway to Europe and lots of Asia service. Good sized domestic operation as well.
SFO - UA's gateway to Asia and the West Coast. Healthy Europe and domestic service.

Those are the airports I would consider UA's true "hubs". In addition you have what I would call two very large O&D operation with LAX and IAD.

If something was expendable, its probably going to be service from the O&D operations as opposed to the hubs.
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 7:46 pm

Quoting OA412 (Reply 12):
UA has a lot of strengths, yet they continue to under perform their two main rivals. Something clearly needs to give.

The knock on UA was that the product was bad and customer service was awful. So they invested in the product by refreshing fleets and facilities, increased on time and completion factors, then boosted customer service by overpaying and giving in to employee demands. All of it worked, but surprise, it cost money, and the street hates spending money unless it's on themselves. So what is there left for UA to do? It's either cut cost and get drilled by employees and passengers, or increase cost and get drilled by Wall Street. Pick your poison.
 
RJNUT
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 8:04 pm

the article mentioned DEN has weather issues! [email protected] , the author lost me there! I would love to live in such a beautiful climate..they just get bad publicity for their ill- timed blizzards(MARCH, APRIL, OCTOBER,etc)
 
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 8:27 pm

Quoting klwright69 (Reply 5):
I think the story made an odd point about UA having too many coastal hubs. That's a new one to me. DEN and ORD are huge in their system.

I can see this. Sometimes it can be difficult because you need take a longer path to just connect through a UA hub.

http://i.imgur.com/C20N31a.png
Maps generated by the Great Circle Mapper - copyright © Karl L. Swartz.

It seems like the biggest "hole" in the network is in the southeast. I'm not sure if this is their main problem, but I've definitely noticed difficulties trying to fly UA from this region.
 
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 8:35 pm

Quoting LAXdude1023 (Reply 19):
Think about it this way, what hubs serve what purpose:

ORD - UA's jack of all trades hub. Lots of service to Asia, Europe, and heavy domestic coverage
IAH - UA's gateway to Latin America. Heavy domestic coverage and healthy European coverage
DEN - UA's gateway to the Rockies and major east/west domestic connector. Heavy domestic coverage.
EWR - UA's gateway to Europe and lots of Asia service. Good sized domestic operation as well.
SFO - UA's gateway to Asia and the West Coast. Healthy Europe and domestic service.

Those are the airports I would consider UA's true "hubs".

Agreed. Each of those hubs are well-developed and offer something unique in the UA system that can't be easily replicated elsewhere. LAX and WAS are obviously great markets as well, but in the context of UA's overall network, they're more "nice to have" than "essential."

[Edited 2016-04-28 14:30:58]
 
WesternA318
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 10:03 pm

Quoting exunited (Reply 6):
Dumb, so dumb. Who are these experts anyways, from the sound of it he must one of the A-Net armchair CEO know it alls.

Isnt everyone on here a know-it-all?
 
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calpsafltskeds
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 10:17 pm

First of all, I think the article doesn't make much sense. UA is making progress with much of what the article calls for. I know other airlines are making changes, but UA is finalizing fleet changes with 752 retirements, reconfigurations and WiFi installations with maybe 10-15 units in mod everyday - when complete these aircraft will be making money instead of costing to upgrade. New 773s and 789s will add profit as soon as they enter the fleet. UA doesn't have to find replacements for aircraft like the MD80s. UA also has a large international network from its major hubs. Remember that the CO/UA merger was a few years behind the NW/DL merger and was harder as the carriers with virtually equal size vs. DL being able to "absorb" NW.

Additionally, CO and UA's bankruptcies were years before the DL and NW bankruptcies, which DL is probably still benefiting more than UA.

AA had the most recent bankruptcy and the USAir merger happened with a better economy and fuel price conditions than CO/UA. AA will not escape teething issues.


Quoting Sightseer (Reply 23):
It seems like the biggest "hole" in the network is in the southeast.

Well, If you look at the map and who's already taken large cities like ATL, CLT and MIA, the only city that would seem to make sense would be either Nashville or Orlando.

The ATL effect is major.

While Nashville is roughly about the same distance from ORD, IAH and EWR (and 300 miles from ATL), the city is not as large as WAS and is a domestic only type city. WN already has a decent operation at BNA flying non-stop to large US cities. the same could be said for STL, which is too far west.

Service to MCO would tend to be low yield, but flights would be easier to fill and probably not as peaked as other FL markets. A Caribbean operation would be necessary for connection flow, but that would connect two mainly vacation markets of MCO and the Caribbean.

The way to see what the effect would be on UA if the IAD hub was pulled would be to check flows that can be retained via EWR or even ORD. If IAD was de-hubbed EWR could be up gauged with the released aircraft to accommodate former IAD transfer traffic.
Local WAS traffic would probably be pretty much gone except that UA already carries via DCA.

While I don't believe IAD needs to go, if IAD were treated more like JFK with smaller domestic markets scheduled to connect to/from international flights, some of the operation could be pulled without major loss.
 
DDR
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 10:25 pm

Having the United Nations in NY certainly doesn't do IAD any favors.
 
MIflyer12
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 10:42 pm

Quoting calpsafltskeds (Reply 25):

Additionally, CO and UA's bankruptcies were years before the DL and NW bankruptcies, which DL is probably still benefiting more than UA.

UA was in Chapter 11 12/2/2002 - 2/1/2006

DL was in Chapter 11 9/14/2005 - 4/30/2007

Are you really arguing that coming out of BK fifteen months later than UA (and now nearly nine years ago) gives DL a structural advantage?

Sure, UA's Ch 11 filing was earlier. The difference is spending nearly twice as long under Ch 11 protection.
 
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ua900
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 11:45 pm

Quoting rta (Reply 22):
It seems like the biggest "hole" in the network is in the southeast.

Domestically, yes.

Quoting DDR (Reply 26):
Having the United Nations in NY certainly doesn't do IAD any favors.

They can use *A out of JFK  
Quoting LAX772LR (Reply 13):
Not sure how near-hourly service to every one of their hubs, plus every major domestic leisure market, plus longhaul nonstops to LON/TYO/SYD/AKL/PVG.... constitutes "giving up."

Any new int'l routes outside of AKL? DL and AA seem to pay closer attention, and I find myself more and more often at TBIT or T2 when flying *A int'l ex-LAX. UA prefers SFO in CA. Only really great thing in LAX is that p.s. went 100% flatbed.

Quoting Sightseer (Reply 23):
LAX and WAS are obviously great markets as well, but in the context of UA's overall network, they're more "nice to have" than "essential."

Both are a dump on the UA side. Let's see what investments will do freshen them up. As it stands A/B gets my business at IAD and TBIT at LAX. So much better customer experience.

Quoting LAXintl (Reply 8):
I would be careful how IAD is characterized. The hub has continually had profit issues going back to 2002 and the BK. The hub has never achieved the critical mass it needed including key domestic north-south connectivity to make it a true success. For the most part the hub was a part-time East-West hub.

Getting rid of the "temporary buildings C/D" would help. It couldn't have been a north-south hub before 2009 due to sUA weakness in the SE, so it was UA's EWR. That role is a bit redundant domestically now, but if you tried to route all the int'l UA stuff through EWR you'd be hard pressed to do it. And you can't do it in DCA either, so there's the business case for IAD.

Quoting LAXdude1023 (Reply 19):
Those are the airports I would consider UA's true "hubs". In addition you have what I would call two very large O&D operation with LAX and IAD. If something was expendable, its probably going to be service from the O&D operations as opposed to the hubs.

That means they'd have to shut down GUM and NRT hubs first. And IAD and LAX are not expendable. They own DC area int'l flying because of owning IAD and LAX people would desert UA at much higher rates if UA were to make further cutbacks there. They won't all get into a 739 to SFO to connect there and make even more trips a 2-stop. And both SFO and EWR have some fabulous delays and congestion at times, which is why some people will always prefer connecting through IAD and others would rather fly DL through SEA or ATL.
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ual777
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RE: Should UA Shrink To Profitability?

Thu Apr 28, 2016 11:53 pm

Quoting B737900ER (Reply 20):

Quoting OA412 (Reply 12):
UA has a lot of strengths, yet they continue to under perform their two main rivals. Something clearly needs to give.

The knock on UA was that the product was bad and customer service was awful. So they invested in the product by refreshing fleets and facilities, increased on time and completion factors, then boosted customer service by overpaying and giving in to employee demands. All of it worked, but surprise, it cost money, and the street hates spending money unless it's on themselves. So what is there left for UA to do? It's either cut cost and get drilled by employees and passengers, or increase cost and get drilled by Wall Street. Pick your poison.

UA is structurally different than DL and AA. Just in hub costs, the number I was told was $400 million per year more than DL. Further, the latest pilot contract was the company's idea not ALPA clamoring.

The ship is turning and these analysts are late to the party. UAs problem is threefold. Lack of reliability, cheap ongoing the product, and completely tone-deaf managment.

The soft product, on-time reliability, and management have all already changed or are changing for the better. The results will lag though. It will be 18-24 months until the impact shows up on the balance sheet but I can assure you this is not the same UA as 2-3 years ago.
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B737900ER
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 12:12 am

Quoting ual777 (Reply 29):
Further, the latest pilot contract was the company's idea not ALPA clamoring

Pilots aren't the only workgroup at an airline. The IAM cried and cried about pay and outsourcing. So the company insoursed and is now going to pay a ramp guy 33 dollars an hour plus benefits instead of the 10 per hour they would have paid a contractor like DL and AA pay now. Mechanics and FAs are also screaming for large pay raises. That's only going to increase costs further, all while fuel is rising and revenue is plummeting.

Quoting ual777 (Reply 29):
will be 18-24 months until the impact shows up on the balance sheet

Altimeter Capital doesn't have 24 months to wait for the improvements to take place. They want a return the next quarter and the one after that and so on. Munoz is going to feel more and more pressure to improve financial performance. And so far, although creating a better travel experience and work environment, the improvements have hurt the balance sheet. The stock has lost 12 dollars a share in the last week and is still falling. Don't think they will sit around and take those losses.
 
lhcvg
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 12:34 am

Quoting Sightseer (Reply 23):

Minor quibble, but I would argue that even if IAD is merely "nice to have" as opposed to the "essentials" of an NYC hub, ORD as your Midwest hub, and SFO as the perfect Asia gateway, the "capital to capital" aspect of IAD (plus the broader Europe/Africa connectivity) does make business sense. To rehash what many others have said on here (sorry for no cites right here but credit in toto), IAD may not be crown jewel, but it most certainly has "value-added" to the UA network.

Quoting calpsafltskeds (Reply 25):

That's always been what's interesting to me about UA lacking a Southeast hub. Obviously it is a big hole, particularly after the loss of the US codeshare leveraging CLT. But between ATL and CLT I wonder if there really is much room there. I feel like DL's approach to MEM post-merger is telling in that CVG-style second-tier Southeast hubs just don't seem too viable anymore (RIP MEM and RDU).

Point being, I would be interested to hear the route/network planning dept's thoughts as to whether an increased SE presence is even a viable business strategy.
 
IPFreely
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 12:54 am

Quoting exunited (Reply 6):
What kind of business closes a profitable operation in order to hand it over to one of your competitors? You don't think AA or DL would jump on the international routes immediately?

No, they wouldn't, for two reasons. One, they have no feed to those routes at IAD. Two, those routes would be redundant with their other east coast hubs.
 
IPFreely
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 12:56 am

Quoting LAX772LR (Reply 13):
Not sure how near-hourly service to every one of their hubs, plus every major domestic leisure market, plus longhaul nonstops to LON/TYO/SYD/AKL/PVG.... constitutes "giving up."

Your own statement that UA has hourly service from LAX to all of their hubs proves B747forever's point.
 
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STT757
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:03 am

Here's a scenario how UA could redistribute International aircraft and route authorities from IAD to other UA hubs:

IAD-AMS 1 763 > * Fleet pool
IAD-BCN 1 764 (Seasonal) > EWR-DUB 1 764 (Seasonal upgrade from 752)
IAD-PEK 1 777 > IAH-PEK 1 777
IAD-BRU 1 777 > * Fleet pool
IAD-DUB 1 752 (Seasonal) > EWR-Cork 1 752 (Seasonal)
IAD-FRA 2 772 > EWR-FRA 1 772, 2nd IAD-FRA 772 to *Fleet Pool
IAD-GVA 1 763 * Fleet Pool
IAD-HNL 1 764 > IAH-OGG 1 764
IAD-LIS 1 752 (Seasonal) > EWR-Porto 1 752 (Seasonal)
IAD-LHR 1 752, 2 772 > 1 LHR frequency to DEN-LHR 1 788. ** 2 LHR frequencies and 1 752, 2 772 to Pool
IAD-MAD 1 763 (Seasonal) > EWR-ARN 1 763 (Seasonal) replaces seasonal 752 to ARN
IAD-MAN 1 752 (Seasonal) > ORD-MAN 1 752 (Seasonal)
IAD-MUC 1 772 * Fleet Pool
IAD-CDG 1 772 > IAH-CDG 1 772
IAD-FCO 1 772 (Seasonal) > SFO-FCO 1 772 (Seasonal)
IAD-GRU 1 763 > * Fleet Pool
IAD-NRT 1 772 > * Fleet Pool
IAD-ZRH 1 763 > *Fleet Pool
IAD-LAX 1 772 > EWR-LAX 1 772
IAD-SFO 1 772 > EWR-SFO 1 772

Quoting lhcvg (Reply 31):
That's always been what's interesting to me about UA lacking a Southeast hub. Obviously it is a big hole, particularly after the loss of the US codeshare leveraging CLT. But between ATL and CLT I wonder if there really is much room there.

I think RDU could support a hub, again.
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LAXintl
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:12 am

Quoting ua900 (Reply 28):
That role is a bit redundant domestically now, but if you tried to route all the int'l UA stuff through EWR you'd be hard pressed to do it. And you can't do it in DCA either, so there's the business case for IAD.

And United is hard pressed to keep the business case alive at IAD.

At recent sales conference they spoke about how they are working hard to funnel more international passengers via IAD to keep the operation viable. For example in AMS, they have promotion where they are giving out 20 EUR vouchers to be used at the airports shops for customers that book the IAD service.
Across Europe they are pushing efforts to drive incremental connection revenue via IAD to markets like MCO and LAS. MWAA is also helping fund billboard campaign in Europe to push UA IAD flights.

The IAD case is being hurt more and more each passing year. One one side you have popularity of DCA for domestic service, another side you now have the EWR international option which did not exist prior to the merger.

Fact is IAD today has way too much service for its own needs and domestic spokes in particular are weak. Company is working hard to fill the seats and flowing connections via IAD when possible, but the economics cant be pretty.

Personally I believe the point might be near where you will see further capacity cuts, downgauges and maybe eventually a more bare bones schedule left at the IAD hub.

Quoting lhcvg (Reply 31):
Point being, I would be interested to hear the route/network planning dept's thoughts as to whether an increased SE presence is even a viable business strategy.

The following was response at an March employee town hall.

Q. What kind of plans does the airline have to fill network gap in the economically growing Southeastern United States? Has there been any thought to a hub in places like Orlando, or Carolinas?

A. In large, we aren’t big in the southeast because of a combination of low yields, our history/geography, and other priorities.

First, southeast yields tend to be lower than the U.S average. Building a presence in a new market/region is always expensive, especially when there are entrenched competitors.
AA’s bankruptcy was not a traditional one, as they went in with plenty of cash and grew their network during the process. They have a strong hubs in CLT and MIA and DL has a very strong hub in ATL.
Given our costs, it makes more sense for us to build our network for business passengers first, and then focus on leisure traffic where possible. We do fly from all of our hubs to the Southeast, but establishing a new hub there would be a risky venture as we go after lower-yield traffic with a high-cost airline. Over time, we might be able to make some inroads there, but it would be incredibly expensive and distract us from other important parts of our network, and we'll get to that part last.

Second, our history and geography also play important roles. If you might recall, UA used to have a meaningful MIA operation, which ultimately proved to be unprofitable and needed to be cut. A history of losses are a strong predictor of future losses albeit not the only one. Delta in ATL is incredibly well-positioned as a connecting hub not only for the Southeast, but also for a vast demand-weighted portion of the country. While it does connect lots of Southeast traffic, we wouldn’t call it a Southeast hub, as it does connect international traffic as well as East-West.
Industry data also indicate that MIA isn’t a traditional connecting hub for AA, and largely just serves the local Latin community and some US Domestic Leisure. One might think there would be an opportunity to compete for this local traffic, but history has shown this to be tough. US tried to grow its presence in FLL last decade and had to retreat from that strategy as losses mounted, while today the market has very strong LCC presence. Adding capacity in already well-served markets is almost always going to result in losses, and historical results both ours and others has shown that more of than not.

Finally, regarding priorities. Most industry analysts accept that the current success of the U.S. majors is due to capacity discipline. In the “bad old days” of boom/bust, carriers pursued market share above all other priorities, which drove huge losses over the course of the business cycle, and resulted in the entire industry having lost money in aggregate since deregulation. In recent years, things have changed. While carriers do pursue market share objectives, they do it not by adding net new capacity, but by moving capacity from other underperforming parts of the network. DL has been doing exactly this as they try to build a bigger NYC presence at LGA and a Pacific gateway at SEA. The long term viability of both is not a certainty. Rather than order airplanes en masse to add this capacity, they pulled airplanes from CVG, MEM, and other hubs to “fund” the growth. AA has done the same by reducing STL, PIT, and LAS. So in a world where we want to grow our presence in the Southeast market and risk losses, what are we willing to give-up? Are we willing to reduce flights at SFO and give others an incentive to grow there? Are we willing to give up slots at EWR? Are we willing to shrink ORD and allow AA/WN an easy path to take our Chicago passengers? In that context, one can see that only the surest of bets should be undertaken, because any strategic effort we make will come at a much higher cost than just buying new airplanes.


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malaysia
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:13 am

Quoting LAX772LR (Reply 13):
Not sure how near-hourly service to every one of their hubs, plus every major domestic leisure market, plus longhaul nonstops to LON/TYO/SYD/AKL/PVG.... constitutes "giving up."

Thought they had MEL not AKL?
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Freshside3
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:14 am

Smaller planes to Australia and Seattle.........haven't they shrunk enough??
 
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LAX772LR
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:25 am

Quoting IPFreely (Reply 33):
Your own statement that UA has hourly service from LAX to all of their hubs proves B747forever's point.

How do you figure?


Quoting malaysia (Reply 36):
Thought they had MEL not AKL?

Correct. I had AA in mind while typing that, sorry.
I myself, suspect a more prosaic motive... ~Thranduil
 
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:33 am

Quoting calpsafltskeds (Reply 25):
While Nashville is roughly about the same distance from ORD, IAH and EWR (and 300 miles from ATL), the city is not as large as WAS and is a domestic only type city. WN already has a decent operation at BNA flying non-stop to large US cities. the same could be said for STL, which is too far west.

Service to MCO would tend to be low yield, b

The southeast seems to be sewn up between ATL/DL and CLT/AA. It would be nice if UA could have a SE hub too. But there really isn't anywhere else that's viable. BNA is growing but its locked up by WN and supposedly they want to grown there. MCO is way too far south and low yielding. If they truly wanted to a hub to compete with AA & DL they would probably need at least a minimum of 500 daily flights coming and going as ATL and CLT and pretty much mega hubs (ATL with close to 1000 flights for DL and CLT with almost 700 for AA). You wouldnt be able to go in there with some mini hub of about 200 daily flights and be able to compete (that's part of what happened with AA in the early 90s with BNA and RDU, those hubs were much smaller than Delta at Atlanta and US Air at CLT.

Quoting STT757 (Reply 34):
I think RDU could support a hub, again.

I think it also has the potential to as well, but it would have to be a large hub to compete.

Its a shame UA doesnt seem to be able to build IAD into something more. One would think with what they have now at IAD and IAH they could effectively serve as gateways into and out of the southeast.
 
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:45 am

Quoting STT757 (Reply 34):
I think RDU could support a hub, again.

No argument with that, it might well be able to, IF someone decides it's viable as a network carrier (i.e., not just a latter-day Skybus).

Quoting LAXintl (Reply 35):

Thanks for the info! That's pretty much what I've always figured their thoughts were, as there just doesn't seem to be a play that can be made profitably and on a network-wide opportunity cost basis.
 
kiwiandrew

RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 1:57 am

Quoting STT757 (Reply 34):
I think RDU could support a hub, again.

While Civ-Av is not the place for a political discussion, I would have thought that most businesses would be steering clear of making new investments or expanding their presence in North Carolina at the moment for obvious reasons. Down the track, once current issues have been resolved, that could change of course.
 
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 2:39 am

Quoting kiwiandrew (Reply 41):
While Civ-Av is not the place for a political discussion, I would have thought that most businesses would be steering clear of making new investments or expanding their presence in North Carolina at the moment for obvious reasons. Down the track, once current issues have been resolved, that could change of course.

While I certainly don't see RDU becoming a legacy hub of any type, I doubt the current blow-back will affect them much, longterm.

The general pattern has been: State makes discriminatory law, public pushes back, state holds out to save face but eventually relinquishes, people/businesses eventually forget.

See Indiana.
I myself, suspect a more prosaic motive... ~Thranduil
 
IPFreely
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 4:36 am

Quoting Freshside3 (Reply 37):
How do you figure?

LAX used to be a UA hub -- this making it an important part of their network. For many years UA had the most flights and largest market share at LAX, by far.

Now, according to your post, LAX is important because it has flights to all the UA hubs. LAX is no longer a hub and UA no longer has the highest market share at LAX. And instead of competing they appear to be happily on a path to be somewhere between #3 and #5 at an airport where they used to be #1. b747forever is therefore correct -- UA has given up on LAX.
 
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 5:07 am

Quoting IPFreely (Reply 43):

LAX is a hub for UA.
 
jetmatt777
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 5:10 am

LAX not a hub?

Today United operates a total of 137 flights, 89 of which are mainline.

Certainly not as large of a hub as it used to be, but it's not a focus city or a spoke. It very much is a hub. United also recently invested millions in renovations to the terminals. United is also insourcing all of the express ramp work. They have not given up in LAX but have definitely reduced some.
 
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 5:21 am

Quoting IPFreely (Reply 43):
LAX used to be a UA hub

Wrong. It still is.

Quoting IPFreely (Reply 43):
LAX is no longer a hub

Wrong. It still is.


Quoting IPFreely (Reply 43):
UA no longer has the highest market share at LAX.

Not having the highest market share does not equate to "has given up on the market."


Quoting IPFreely (Reply 43):
b747forever is therefore correct -- UA has given up on LAX.

Fallacious summary.
I myself, suspect a more prosaic motive... ~Thranduil
 
B747forever
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 6:11 am

Quoting jetmatt777 (Reply 45):
Today United operates a total of 137 flights, 89 of which are mainline.

How many of those are to their hubs, because if what LAX772LR says below, it doesnt leave many other non-hub routes out of LAX.

Quoting LAX772LR (Reply 13):
Not sure how near-hourly service to every one of their hubs, plus every major domestic leisure market, plus longhaul nonstops to LON/TYO/SYD/AKL/PVG.... constitutes "giving up."

Giving up in the sense of not expanding and keeping up with AA/DL at LAX. UA has been shrinking and not growing at LAX.
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 6:20 am

Quoting IPFreely (Reply 43):
LAX used to be a UA hub -- this making it an important part of their network. For many years UA had the most flights and largest market share at LAX, by far.

LAX is still a hub, but UA has definitely (slowly but surely) downsized it over the years, choosing more to focus on SFO. LAX has the beauty of having enormous demand, and I feel if the demand wasn't that size, UA would be much more smaller. I think the only unique international destination that UA serves from LAX is MEL, and if push came to shove, they could easily move it to SFO.

Quoting kiwiandrew (Reply 41):
While Civ-Av is not the place for a political discussion, I would have thought that most businesses would be steering clear of making new investments or expanding their presence in North Carolina at the moment for obvious reasons. Down the track, once current issues have been resolved, that could change of course.

Money goes where money goes, politics be damned. And I will just leave this as my only response to this particular subject matter as far as this thread is concerned.
When wasn't America great?


The thoughts and opinions shared under this username are mine and are not influenced by my employer.
 
jetmatt777
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RE: Should UA Shrink To Profitability?

Fri Apr 29, 2016 6:24 am

Quoting B747forever (Reply 47):
How many of those are to their hubs, because if what LAX772LR says below, it doesnt leave many other non-hub routes out of L

SFO 12x
IAH 10x
EWR 13x
ORD 12x
IAD 7x
DEN 6x

60 flights a day to other hubs.
77 flights a day to various spokes.

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