FWAAA

I wouldn't say I'm against capacity reductions. I'm in favor of people discussing ideas based on reality and actual facts and not their narrative or what they wish had happened.

Someone dismissively posted that claims that UA has been shrinking and may continue to shrink are "false" and I posted the evidence that UA has actually been shrinking. Nothing more, nothing less.

The news that prompted this thread - that UA's 3rd quarter unit revenue has grown at a higher percentage than the competition - is a small token of good news for UA. Sometimes airlines can shrink to increased profitability.

UA's problem since March, 2012, is that its revenues have not grown much compared to DL, AA or US. 2012 revenue was flat compared to 2011, while the competition pulled away from UA. 2013 saw better revenue growth at UA, but the competition also increased their revenues substantially.

I applaud moves such as cancelling BKK and other NRT hub downsizing. That hub duplicates the operations of its joint venture partner NH, and it's ridiculous for UA to continue that high-cost flying.

I criticize UA's war against its "over-entitled" elites. How is it that AA's revenues skyrocketed in 2012, immediately after it filed for Bankruptcy protection, while UA's revenues stayed flat in 2012? Some of those people switched to AA, and AA has since grown. DL and US also attracted some of those dollars. That's put Smisek in the position of having to find $2 billion worth of savings not long after merging UA and CO together.

Long-term, UA faces some challenges. A lot of US passengers flew UA and other Star partners to Asia, and if they stay with US (new AA), then UA will find a lot of empty seats on those planes to Asia (the ones previously sold to US faithful). In response to the universal chorus that AA's Asian network is too small, AA has added a ton of capacity to Asia from DFW, and will probably add a lot more from LAX.

JBord

I'm no expert on the airline industry, but it seems dangerous to pay too much attention to any U.S. airline on a quarterly basis for specific metrics...good or bad.

If I understand what's happened, UA is likely to report at the high end of forecasted PRASM in Q3. First of all, any airline that doesn't have high revenue in Q3 of almost any year is probably in trouble. Couple that with some of the big weather events and a week of ATC issues at ORD which cancelled thousands of flights (don't know UA specific number), and the fact that UA is not growing capacity, why would we be surprised PRASM is up?

Seems to this non-expert that this is a metric we would want to see trend positively for several quarters to be meaningful.

On the positive side for UA, I do think they're going to outperform AA for a while. Just a gut feeling based on some observations.

fly18725

I fully agree that UAL shrank in the past. At this point, all forward looking statements point to flat to slightly up capacity on a full year basis Going forward, which of course is subject to change.

Claiming that UAL will continue shrinking may be a valid personal opinion, but a completely untrue fact.

UAPremierGuy

I am no UA apologist as many of my posts since the merger illustrate, but I do have to congratulate UA on these numbers. I think UA did better, in part, because as AA started to make negative changes to its FF program, and cut meals in premium cabins domestically while UA, meanwhile, announced improved meals and shorter meal windows, some HVFs were willing to give UA another look. Hopefully UA uses the revenue gain to re-invest in its hard and soft product, but doubt that'll be the case under the SMI/J regime.

spin88

I think the best way to look at this, is to say that UAL will be basically flat in ASM and RSM for 2014. Guidance for 4th Q if met, suggests about a .2% increase in ASM for the year, all of that is international, with domestic ASM falling substantial. A couple of bad weather day and UAL will shrink.

But as I showed, the bigger story is UAL becoming the 3rd largest carrier, and being outpaced by Delta.

UA-NYC

Nothing to congratulate yet you know. See the above points about weaker comps and cancellations this quarter goosing PRASM figures.

AA is already backtracking on the meal downgrades (which BTW even in their poorer state were much better than UA domestic F meals the past couple years). Kudos to them for quickly listening ^

fly18725

Why is size relevant? How do you even measure "largest carrier"? If by passengers, United's been smaller than Delta and Southwest for years. If you suggest ASMs are relevant for comparing size, why wouldn't the impact of longer flights with more ASMs be considered when comparing unit revenue?

halls120

How can an opinion that UA may shrink in the future be an "untrue fact?" Do you have special insight into the future which gives you the ability to know what definitely happens in the future?

HNLbasedFlyer

That I agree with that - the top 3 carriers are way to large, it can't be good for fliers to see any of them grow/expand.

spin88

What you are suggesting - that more of UAL's (before now shrinking/now flat) ASMs are going to more long flights is clearly true. The domestic network has been cut far more than the headline ASM numbers suggest. Why is that relevant?

United is no longer as it was at the time of the merger the largest carrier with the best network. Major holes have opened up in the network, and its directly tied to total ASM and where they are (international vs. domestic) being put.

As HVFers and Corporate contracts reconsider who to fly with, these cuts (in 2014 UAL stagnating while DAL grows) matter. I was very very unhappy with the service I received from UA after Jeff took over. Had I gotten fewer small RJs (on mainline routes I fly often) and real planes when going to a hub (757s or wide body as before, not a A319/A320 with poor upgrade changes) from SFO, I might have put up with the crappy OT performance and sub-par service. Put another way, you will retain some traffic with crappy service, if you have the best network. But if your network is a lot of RJs and small (with few FC seats) slimmed mainline seats, then its not surprising that HVFers will bail to competitors that are adding service and expanding their networks.

channa

And that I think may be the big reason flyers are fed up with UA. Every company makes mistakes. When's the last time we saw UA backpedal swiftly on a mistake?

It took them 3 years to address the catering issues despite rampant complaining (and frankly, it's not clear they've been fixed, though they've been improved). AA took about a month to start adjusting the meal issue after complaints; DL took about a month to adjust some of the spirits in the clubs after downgrades.

UA seems to make their moves and then ignore any feedback. Then a couple years later, they realize what they did.


You make a good point about network, but in isolation, the point is also valid. Domestic is where the growth has been for the past few years. UA has a lot higher lost opportunity in the domestic segment than AA/DL.

bseller

I'm sure I'll be skewered for daring to suggest that pmCO could do something wrong, but wasn't this the M.O. since the beginning of time for the HouCrew?
If you're hub captive in EWR, IAH, or GUM - what difference could your complaints POSSIBLY make??

Dave

spin88

And I think that is why (in part) Delta and AA have done better the last few years. Delta in particular with upgaging and building out its network has been able to capture more HVFer traffic.

I have noted before that capacity cuts (which UAL continues to have domestically, so far in 2014 domestic ASMs down) tend to push up both Yield and PRASM short term. The airline has a certain number of captive fliers (at hubs, members of FF program) that it can milk, and it takes a while (often at year end) for them to look at other options. Flat traffic and a PRASM of +4% is not as good as traffic up 3-4% and PRASM up +3% IMHO. We will know soon the final numbers all around so we can make an informed judgment.

If United has turned a corner and is truly attracting new/more HVFers then that is great for them. But if they are just squeezing the folks that still fly UAL more (changing RM strategy) then its a strategy that will only work well when demand is very tight (as it was in the 3Q) and it will have long term consequences in future lost traffic.

goodeats21

And don't forget that UA's domestic network took a BIG hit with the departure of US Airways out of Star Alliance. It is not measured in United's ASM statistics, but in the real world this was a major blow to their route system. I would bet this has also made corporate contracts a bit tougher...

BearX220

Correct -- one swallow doth not make a spring. It's disingenuous to isolate one positive data point from the highest-tide quarter of the year and claim it obviates years of general decline. Wait and see how Q4/Q1 look.

I fully expect AA to pay a merger friction tax, but not for four years.

Agree. Permanent #3 or, for domestic, #4.

With so few big airlines left it is worse for fliers to have any of them become an also-ran. Effectively less choice.

No skewering -- in fact one of UA's biggest issues is the HouCrew's impulse to make the merged airline into Continental plus SFO / TPAC... e.g. revert to what they know, which worked OK when CO was one of 8 or 9 major airlines but not when UA is one of three.