EWR764

No no, I was just referencing the fact that United reportedly screwed up on its capacity and use projections for the Polaris lounge, so it had to go back to the drawing board late in the game to expand the respective footprints of the lounges, which resulted in the current delay.

All indications are that the developers of the ESB got it right!

N104UA

President Kennedy asked us to to to the moon in May of 1961 and we landed on the moon in July 1969, which involved a redesign after Apollo 1. So your analogy is apt, considering the redesign after the ORD lounge opening.

UA has at least 5 more years to beat the moon timing.

halls120

st530

If LHR is really 4Q 2019 and HKG and NRT sometime thereafter (per post #321 ), I take that as good news. Long(er) live the GFLs!

DCA writer

I think C17 is smaller--at least, it looks smaller on the map in the app, and its lower level doesn't span the width of the concourse like D8. The same map, however, doesn't show obvious expansion possibilities for C7 unless they build out room downstairs.

Either way, I don't think an IAD Polaris Lounge will face the same demand as the ORD lounge: LH (and OS, SN, CA, NH, SK, SA, TK, etc.) passengers at IAD already have good lounges of their own that also sit in the right concourse for their flights, while at ORD everybody lounge-eligible on LH will use the Polaris Lounge unless they have some weird hankering for a regular UC.

UAL250

United Will Only Begin "Designing" International Polaris Lounges In 2019 - One Mile at a Time

"United will only begin designing Polaris Lounges in London, Hong Kong, and Tokyo in 2019."

EWR764

Honestly, I'd prefer they devote resources to the domestic lounges now... the situation at United's two most valuable international hubs of SFO/EWR is abysmal.

LHR falls into the "if it ain't broke, don't fix it" category, HKG was recently refreshed, and NRT, while a bit tired, is still nicer than most domestic lounges and has high-quality ANA facilities in close proximity.

UA needs to get its onshore hubs together first, although it's pretty clear to me that this is a deferral of facilities-related capex, as well as a 'wait-and-see' to determine if the Polaris product actually drives any meaningful premium.

I also believe the Polaris product is turning out to be a monumental failure, not because it's a low-quality product, but actually quite to the contrary. Projections for lounge use were seriously undershot, which first creates a customer experience and perception issue because of crowding. This leads to redesign ($$$) and the need for increased square footage ($$$ for build-out and rent). In some locations, the Polaris lounges were to occupy part of the existing United Club real estate, but the need for a larger PL footprint, especially at coastal hubs, calls for the UC to be reduced in size, redesigned and/or relocated (see ORD). This costs more money than projected for design, construction and increased rent. The increased occupancy also calls for higher consumption of services, F&B, etc., which totally blew up budgeting for PL operating expenses.

Plus, I am certain UA projected Polaris would lead to improved international revenues, counting on extracting more revenue from the aircraft square footage previously occupied by the generally non-contributing F cabins, plus the slim possibility that the product would actually drive a revenue premium over competing business classes. Obviously, the multi-month delay (really closer to a year) in procuring seats and retrofitting three-cabin airplanes set those models back significantly.

Returning to the airport, my guess is United thought it could shoehorn the Polaris lounges into substantially the same real estate as the existing portfolio, believing it to be a zero-sum game (with same/similar lounge uptake rate as before). It also probably baked the first-iteration Polaris lounge construction into the facility capex figures for a few years going forward, not taking into account redesigns/rebuilds. Now, UAL finds itself in a difficult position, because it oversold the lounge product as a centerpiece of the "Polaris Experience" and really can't walk that back too much, but it is clear that the execution is going to cost much more than anticipated, and may not drive the kind of revenue improvements that were planned, at least not right away. At the same time, the company is coming under pressure from Wall Street to reduce capital expenditure and a new management team clearly has a different philosophy for the premium product.

United's solution to this conundrum, for now, appears to be a slow-play.

Kacee

lol. On lounge tracker, IAD, LHR, HKG, and NRT now just listed as "Future Locations." Polaris Tracker - Desktop . Meanwhile, SFO, EWR, IAH listed as "Summer 2018" - so much for "Q2" as very recently announced.

When are they going to get their story straight? Could this have been bungled any worse? (rhetorical question)

They'll never know whether it might have, because they've done so much damage to the brand with all the broken promises.

TA

A question out of curiosity: is the UA corporate team that is responsible for the DEN catering mismanagement the same team that deals with getting all these Polaris lounges set up as well? Are they not sufficiently staffed / underresourced to handle all these things at once?

EWR764

They'll be able to measure it, no question. What will be less clear is the extent of the damage. I think the FT community is much more acutely sensitive to the product shortcomings/changes than most of United's customer base, but there is little doubt that the company has a problem with this.

Artpen100

Could not agree more. They have no credibility at this point. And why do they list LHR, since it already has the best UC in the system? IAD, on the other hand, is decrepit and undoubtedly pushes people to the OAL in A/B. (I think it is a major reason why many UA elites fly LH.)

Kacee

Yes they can measure it, but they'll never know what the premium could have been if this had been managed properly. But you're right, that won't stop them from drawing conclusions; they'll just be tainted. And probably be used to justify further cuts.

EWR764

Right. I think the Polaris-ized aircraft will ultimately be better revenue performers than their predecessors. The F cabins don't really sell in most markets and require duplication of non-revenue-generating resources (lavs, galleys, closets) to support. Replacing the space with seats that sell more reliably, at higher density, should lead to better revenue (and unit cost) performance.

Still, IMO any improvement results more from having a larger number of seats of products that actually move (J/Y and ultimately J/W/Y as opposed to F/C/Y), plus additional aircraft space devoted to revenue generation, than the Polaris product actually attracting higher fares in its own right. International business class is competitive and highly commoditized such that a product that can drive revenue premiums on a standalone basis is rare and might cost more to deliver than the benefit it confers.

Kacee

No doubt. Look at all the business class fare sales Ex-EU right now.

Still, DL has demonstrated that offering a better product (or what's perceived as a better product) drives higher PRASM.

Personally, I'm definitely choosing my long-haul UA flights based on the 77W, and choosing other airlines on routes where UA flies an inferior product.

EWR764

This is going down a bit of a rabbit hole, but I'm not entirely convinced that's the case. DL's recent Shuttle experiment on the West Coast is a good example that suggests product alone is not sufficient to drive meaningfully better PRASM performance. DL tried to distinguish its offering in a massive O&D market on quality alone (since the other competitive factors are pretty much at parity), which did not lead to a yield premium, or at least enough to justify the expense, so it was dropped. Different eras offer us dozens of examples to this end, discrediting the notion that, by and large, the flying public is willing to pay more for a higher-quality product.

United's Investor Day presentation suggested UA at EWR/IAD/SFO/LAX operates with a 7% margin premium to AA (JFK/MIA/LAX) and DL (JFK/SEA/LAX) versus a 10% margin deficit at domestic hubs. There is quite a bit of overlap (EWR/JFK, LAX) and none of these are low-cost operations, so one component of this premium is UA extracting greater revenue than AA/DL for comparable international flying. That sort of flies in the face of conventional wisdom that United offers an entirely uncompetitive international product, and that such a poor product is actually hurting United on the revenue side. I would argue that advantage stems from United's well-developed feed structure for the international franchise that effectively delivers high-yield traffic to the coastal hub. All these years of UA/CO orienting EWR/SFO/IAD schedules to capture major international traffic flows TATL/TPAC have paid dividends, as evidenced by its United's comps on margin performance at these hubsites. As we know, much of this was done to the detriment of domestic, which was viewed as less-desirable traffic.

All this, IMO, supports Kirby's contention that United is now lacking in domestic connectivity compared to AA/DL, such that it is unable to compete effectively on frequency and gauge over a number of healthy traffic flows which grew significantly post-recession. United, in many cases, has no option in a given market, poor circuity (think lack of a SE hub) substandard timing, equipment or all of the above. So, when we talk about United not offering a good 'product', I don't think it means PTVs, slick marketing, or new FA uniforms. Rather, outside of the hubs, United isn't doing a good enough job of selling a 'product' that can get me where I need to go, when I want to go, in a reasonable time, as compared to AA/DL.

Now that United is doing a better job with fundamentals, e.g. OTP, completion factor, MBR, so on, it needs to increase/improve its presence in more than just hub O&D markets. I think that will ultimately have a greater impact on PRASM than suites with sliding doors, all-aisle-access business class, better food, mood lights or TVs at every seat. It's not to say those product elements DON'T matter; rather, they are simply less consequential than other factors.