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Smisek interview in "Buying Business Travel" article

Smisek interview in "Buying Business Travel" article

Old Jul 27, 15, 8:56 am
  #271  
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Originally Posted by airzim View Post
In the aggregate US corporate traffic drives the market. The corporate market does will not support paying for First Class travel when Business Class with flat beds is "good enough." This has been happening progressively for many years and is without debate happening worldwide as every major carrier (with a few isolated exceptions) is either reducing their First Class offering by number of seats on board seats, eliminating for certain fleets, or truncating it completely.
There are two discrete issues here that some may be commingling. There's the declining market for F in general, which is clear -- there is no longer much business rationale for providing true F on all aircraft, all routes. And then there's UA's refusal or inability to deliver a competitive F product.

Just because the market is narrowing doesn't mean it's evaporated. But today's UA backs away from any fight it can't dominate without really trying. UA is culturally incapable of matching the Asian or European F products, let alone the ME3.
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Old Jul 27, 15, 9:49 am
  #272  
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Originally Posted by airzim View Post
...
In the aggregate US corporate traffic drives the market. The corporate market does will not support paying for First Class travel when Business Class with flat beds is "good enough." This has been happening progressively for many years and is without debate happening worldwide as every major carrier (with a few isolated exceptions) is either reducing their First Class offering by number of seats on board seats, eliminating for certain fleets, or truncating it completely.

This has almost nothing to do with what type of luxury product is offered. If US corporate traffic won't pay for it, it's gone. The market has spoken....
Sorry, this is incorrect. Maybe for the US carriers like UA, but globally, first class travel is still purchased by a number of high ranking business executives and wealthy travelers. The issue is whether or not UA can provide a first class product which is appealing enough to take some of this business on the routes where it makes sense, but when it's priced near the same as far superior competitors, there is absolutely no reason why anyone, absent a severe schedule restriction, would ever pay for UA first class, and the same could be said for UA business class on a PMUA 777.

I did not claim other airlines around the world are not right-sizing the first class cabin for the aircraft and routes where it makes sense, but there will always be a place for a strong, competitive, premium product for customers who are in this category - and there are lots of them - but they rarely, if ever, fly United.

Last edited by WineCountryUA; Jul 27, 15 at 1:27 pm Reason: updated quote to reflect Mod edit
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Old Jul 27, 15, 9:57 am
  #273  
 
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Originally Posted by BearX220 View Post
There are two discrete issues here that some may be commingling. There's the declining market for F in general, which is clear -- there is no longer much business rationale for providing true F on all aircraft, all routes. And then there's UA's refusal or inability to deliver a competitive F product.
Of course they are commingling, but it doesn't mean they aren't interrelated. There's a declining market because of two huge factors (which are completely out of the control of United).

1) Corporate traffic won't justify the expense
2) Corporate business jets which now allow US to Asia non stop

This has absolutely nothing to do with United's inability to compete. If United wanted to spend the money for suites with Dom and caviar, and up service standards to compete with some undefined premium over their Asian and European counterparts, they could certainly do it. They could have best in breed if they were willing to spend the millions.

But at the end of the day, if the market is not there. It's not there. They would waste millions in a product that nobody will purchase for the fare needed to justify the capital outlay. It would be a calamity.

Originally Posted by BearX220 View Post
Just because the market is narrowing doesn't mean it's evaporated. But today's UA backs away from any fight it can't dominate without really trying. UA is culturally incapable of matching the Asian or European F products, let alone the ME3.
Adults think in economic terms. There's no economic justification for First no matter how many ways you run the numbers.

The funny thing is, United is winning the fight. They know the market is gone. Spend the money on a new J seat, and improve your products where you can compete and reap the most financial benefit.

Last edited by WineCountryUA; Jul 27, 15 at 1:29 pm Reason: Let's maintain civility and respect in our discussions
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Old Jul 27, 15, 11:24 am
  #274  
 
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Originally Posted by airzim View Post
Of course they are commingling, but it doesn't mean they aren't interrelated. There's a declining market because of two huge factors (which are completely out of the control of United).

1) Corporate traffic won't justify the expense
2) Corporate business jets which now allow US to Asia non stop

This has absolutely nothing to do with United's inability to compete. If United wanted to spend the money for suites with Dom and caviar, and up service standards to compete with some undefined premium over their Asian and European counterparts, they could certainly do it. They could have best in breed if they were willing to spend the millions.

But at the end of the day, if the market is not there. It's not there. They would waste millions in a product that nobody will purchase for the fare needed to justify the capital outlay. It would be a calamity.



Rubbish. Adults think in economic terms. There's no economic justification for First no matter how many ways you run the numbers.

The funny thing is, United is winning the fight. They know the market is gone. Spend the money on a new J seat, and improve your products where you can compete and reap the most financial benefit.
It's more nuanced than this. Just because one's corporate contract won't let them buy F, I'm going to choose UA J so I can upgrade to GF. If/when GF is gone, and I have many other J options, you can bet I'm going to take another airline. I know many folks that are GS, travel internationally with UA frequently on J fares, and have said because of the ability to upgrade to F.
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Old Jul 27, 15, 11:56 am
  #275  
 
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Originally Posted by bldr1k View Post
I fly several times a week and know very senior executives at many large companies. The number of people who buy first on a 3-cabin airplane is very small. Sure, in Saudi, Dubai and Qatar there are very wealthy people who buy whatever they want, and there are certainly CEOs of late companies who buy first, but the question is how many airlines can make a profit off of such a small number of fliers.

A lot of the Asian airlines invested in First and are now struggling because of the focus on fraud in China.

2-4-2 is a complete joke though - I have no idea who designed this. I would never pay business class on a 2-4-2 airplane (although it is still a lot better then coach).


Originally Posted by luckypierre View Post
The same folks/mentality that brought you 10 abreast seating on the 777, slimline seats, 2 additional rows on an A320, slimmer or missing lavs, etc.

It is interesting in Smisek's disdainful remark about the fate of first he focused on the real estate consumed by the cabin, not the soft side of the offering.

Pack 'em in.
You are mxing your dislikes. While these things are not travel friendly, they are brought to you by different people than 2-4-2. 2-4-2 is a pre-merger UA invention. pmCO 777's are all 2-2-2
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Old Jul 27, 15, 12:06 pm
  #276  
 
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Originally Posted by kevanyalowitz View Post
It's more nuanced than this. Just because one's corporate contract won't let them buy F, I'm going to choose UA J so I can upgrade to GF. If/when GF is gone, and I have many other J options, you can bet I'm going to take another airline. I know many folks that are GS, travel internationally with UA frequently on J fares, and have said because of the ability to upgrade to F.
Other than the 20 77W planes on AA, there's no other airplane has International First after all the 777 are reconfigured.

DL has zero planes configured in International First.

UA still has First on something like 50 777 and the 25 744s.

So who are you going to fly and use a "GPU" or the equivalent instrument?
If you have flexibility to move carriers, by all means move your business.

It's not nuanced in the least. The market has spoken and the airlines are delivering the product that the market wants. That's not International First. And United is launching a new seat expected to debut next year. Given the track record of all US carriers, I think it is safe to say the product will be similar in most respects to what DL and AA will offer. But based on what's been published, UA will continue to offer more on board J seats than either DL or AA.

Keeping GF so customers can use instruments to upgrade is a irrational reason for keeping a product.

Last edited by WineCountryUA; Jul 27, 15 at 1:32 pm Reason: Commenting on posters is not allowed
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Old Jul 27, 15, 12:11 pm
  #277  
 
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Originally Posted by kevanyalowitz View Post
It's more nuanced than this. Just because one's corporate contract won't let them buy F, I'm going to choose UA J so I can upgrade to GF. If/when GF is gone, and I have many other J options, you can bet I'm going to take another airline. I know many folks that are GS, travel internationally with UA frequently on J fares, and have said because of the ability to upgrade to F.
I think this is a valid point. However, you don't run a sustainable business by attracting J customers by offering upgrades to an uncompetitive F to compensate for a uncompetitive J product. If you want to attract J customers, you come up with a competitive J product.
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Old Jul 27, 15, 12:16 pm
  #278  
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Originally Posted by airzim View Post
Other than the 20 77W planes on AA, there's no other airplane has International First after all the 777 are reconfigured.

DL has zero planes configured in International First.

UA still has First on something like 50 777 and the 25 744s.

So who are you going to fly and use a "GPU" or the equivalent instrument?
If you have flexibility to move carriers, by all means move your business.

It's not nuanced in the least. The market has spoken and the airlines are delivering the product that the market wants. That's not International First. And United is launching a new seat expected to debut next year. Given the track record of all US carriers, I think it is safe to say the product will be similar in most respects to what DL and AA will offer. But based on what's been published, UA will continue to offer more on board J seats than either DL or AA.

Keeping GF so customers can use instruments to upgrade is a irrational reason for keeping a product.

You're missing the point.

UA's Business product is sub-par. Giving paid biz pax the option to upgrade to GF gives UA an edge. Take the edge away, and now the playing field is level. If the playing field is level, why would you buy something that's sub-par?

Now if UA wants to do like DL and have a solid product with direct aisle access, improve the food quality, have solid reliability, etc., then maybe they can earn some business on quality without having to give something "better" away to win it.

Last edited by WineCountryUA; Jul 27, 15 at 1:33 pm Reason: Quote updated to reflect Mod edit
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Old Jul 27, 15, 12:41 pm
  #279  
 
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Originally Posted by fly18725 View Post
I think this is a valid point. However, you don't run a sustainable business by attracting J customers by offering upgrades to an uncompetitive F to compensate for a uncompetitive J product. If you want to attract J customers, you come up with a competitive J product.
But UA has been unable to offer a competitive product on just about every front. That is why they continue to retreat when faced with head to head competition. The FF program has helped drive traffic to them, that they wouldn't otherwise be getting. As they have trimmed back on the benefits, the HVFs have continued to defect to other carriers.

Call me skeptical, but if I had to bet, I would bet that the new J product is similarly noncompetitive. Therefore, slashing F, will just reduce the demand for their new J product and drive more HFVs elsewhere.
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Old Jul 27, 15, 1:06 pm
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Originally Posted by channa View Post
You're missing the point.

UA's Business product is sub-par. Giving paid biz pax the option to upgrade to GF gives UA an edge. Take the edge away, and now the playing field is level. If the playing field is level, why would you buy something that's sub-par?

Now if UA wants to do like DL and have a solid product with direct aisle access, improve the food quality, have solid reliability, etc., then maybe they can earn some business on quality without having to give something "better" away to win it.
{Disagree that} DL and AA have a better product on their entire long haul fleet today. So without GF, flying on an angled seat on AA is leveling the playing field?

As for DL their seat might have aisle access, but the rest of the product is not some Shangri-La. Food is OK and the seat is a rock compared to sUA. Honestly not really that much different.

I'll agree that reliability is challenging with UA. But by bringing it up (not relevant to subject at hand), are you implying that United will get a pass on reliability if they keep GF for GPU upgrades? Strange logic.

Last edited by WineCountryUA; Jul 27, 15 at 2:24 pm Reason: removed inappropriate response to deleted post
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Old Jul 27, 15, 1:12 pm
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Originally Posted by FlyingNut724 View Post
But UA has been unable to offer a competitive product on just about every front. That is why they continue to retreat when faced with head to head competition. The FF program has helped drive traffic to them, that they wouldn't otherwise be getting. As they have trimmed back on the benefits, the HVFs have continued to defect to other carriers.

Call me skeptical, but if I had to bet, I would bet that the new J product is similarly noncompetitive. Therefore, slashing F, will just reduce the demand for their new J product and drive more HFVs elsewhere.
All signs point to this. Take a J flight from EWR or IAH and you will experience what the 'new' experience will be like save for a seat with a bit more room.

Last edited by kevanyalowitz; Jul 27, 15 at 1:18 pm
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Old Jul 27, 15, 1:18 pm
  #282  
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Originally Posted by airzim View Post
And United is launching a new seat expected to debut next year.
The new BF seat is going to be rolled out in 2016? On what aircraft?
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Old Jul 27, 15, 1:41 pm
  #283  
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Originally Posted by airzim View Post
[A]t the end of the day, if the market is not there. It's not there...

Adults think in economic terms. There's no economic justification for First no matter how many ways you run the numbers.
Adults with vision think in terms of exploiting, expanding, or creating markets, not surrendering to false limits.

There was a time when nobody envisioned a market for a $6.00 cup of coffee, either. If Howard Shultz had taken advice like yours, Starbucks would not exist.

In virtually every sector there is a market for a superpremium product. In coffee, apparel / fashion, liquor, automobiles, real estate, ice cream, wristwatches, mattresses, and commercial air transport. You can go out and make those markets if they don't already exist. All those sectors also have dull, sluggish, profitable mid-market players that lack the vision, vigor, or brand strength to exploit the top echelon of the market. They tell themselves the opportunity doesn't exist, or it's not worth it, or mock customers buying at that level.

In every business sector there is a mediocre middle tier of entrants that cannot or will not compete at the top.

Originally Posted by airzim View Post
This has absolutely nothing to do with United's inability to compete. If United wanted to spend the money for suites with Dom and caviar, and up service standards to compete with some undefined premium over their Asian and European counterparts, they could certainly do it. They could have best in breed if they were willing to spend the millions.
I and the marketplace utterly disagree. You can shovel mounds of caviar and gallons of Dom into an F suite, but it means nothing if the shovel is wielded by indifferent or angry employees who hate their management and you, and you are running 36 hours late because of a Goose Bay diversion.

The United brand connotes abysmal service and reliability and cannot back a credible F product in the global marketplace, and the United service ethic is fatal to such execution.

United cannot "have best in breed" no matter how much money they spend (and it's an academic question because UA, like you, denies the opportunity).

McDonald's can't market a credible $60 steak, and United can't market credible F. That doesn't mean there are no takers for such a product; there always are. It means better, smarter companies will deliver it. It means UA's destiny is permanent mediocrity. Like Folger's or Yuban in a Starbucks world.

Last edited by WineCountryUA; Jul 27, 15 at 2:28 pm Reason: Let'sdiscuss the issues, not he posters
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Old Jul 27, 15, 1:47 pm
  #284  
 
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Originally Posted by halls120 View Post
The new BF seat is going to be rolled out in 2016? On what aircraft?
Without a doubt on on the 77W, first one due 12/2016, and there are some indications that it could debut on the soon-to-be reconfigured 77G (former three class A-market 777-222s).
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Old Jul 27, 15, 3:03 pm
  #285  
 
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Originally Posted by EWR764 View Post
I saw an interesting snippet this morning:



http://m.huffpost.com/us/entry/55ae4...0a9b9485275bb?

I know UAL has been working with Priestmangoode as of late on its new shorthaul economy seat fabrics and design. Priestmangoode is the real deal, and does not come cheap. I am confident the new product with be good and am heartened by an indication that the company is finally willing to get away from the generic, off-the-shelf style of pre-merger Continental.
I hope they use them for their 77W design (and new J seat...and dare I wish F seat even though that is going away). Looks like they do good work. I like the look of this -
http://thedesignair.net/2015/07/09/s...on-their-777s/
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