UA Announces Q3 2017 Financial Results 18 Oct/ Conference Call 19 Oct
Oct 24, 2017, 9:51 am
#152
Join Date: Feb 2002
Location: NYC: UA 1K, DL Platinum, AAirpass, Avis PC
Posts: 4,599
UA/CO each built their networks on the premise feeding int'l long haul as emerging markets grew was the winning bet for maximizing profit.
DL went on the premise of having a strong consolidated domestic network where fortress hubs give the margin to go and invest in the more competitive big city markets, where there is higher RASM, but lower margin.
The UA/CO bet was the right one for the 2000s, wrong one for the 2010s cycle.
We don't have the numbers, but I would bet margins on long haul int'l have taken a beating at all the US majors since 2010, while domestic margins have increased remarkably for DL/AA, with most of that gain in the hubs. We know for a fact from DL NYC has been a loss maker to now modest margin business for them, but well below the systemwide margin.
DL went on the premise of having a strong consolidated domestic network where fortress hubs give the margin to go and invest in the more competitive big city markets, where there is higher RASM, but lower margin.
The UA/CO bet was the right one for the 2000s, wrong one for the 2010s cycle.
We don't have the numbers, but I would bet margins on long haul int'l have taken a beating at all the US majors since 2010, while domestic margins have increased remarkably for DL/AA, with most of that gain in the hubs. We know for a fact from DL NYC has been a loss maker to now modest margin business for them, but well below the systemwide margin.
No offence, but I’m seeing a lot of revisionist history here. While I understand the desire by some not to see fault in the PMCO/wall street analyst approach to running the combined carrier, according to no less than United, they were the leading carrier after their merger. Here is the state of play as of October 2011, which was before Jeff – following the Hunter Keay play book – started his “changes you are going to like” – everything is a QUOTE FROM UA:
Hubs in 4 largest U.S. cities
Serving the most destinations in the U.S
Merger created global network with unsurpassed scope
Serving the right markets, with the right assets, #1 across the pacific, #1 in US/Canada, #2 to Latin America, #2 across the atlantic
United is generating industry leading results
Revenue – Leads network carriers
Pre-tax margin – leads network carriers
Liquidity – leads network carriers
United leads U.S. network carriers in unit revenue and margin [and by “unit revenue” them mean PRASM ;0]
Have captured more than $130M in synergies year-to-date On track to achieve 25% of $1.0 – 1.2B run rate synergies in 2011
And the plan: “Expect 2012 consolidated capacity to be flat Reduce domestic capacity while growing international”
P.s. I did not just make this up �� https://www.sec.gov/Archives/edgar/d...2148dex991.htm
Delta - with the same "fortress hubs" you claim UA lacks, hence their failure to do well - was behind UA+CO in all respects. UA's fortress hubs (IAH, EWR) had much higher revenue premiums in any event. To the extent the hub networks changed, DL made major changes, which involved it expanding/going into highly competitive markets, JFK, SEA, WestCoast, LAX. United in turn pulled back from highly competitive markets like SEA, LAX, JFK. The actual evidence re the networks in 2012 vs. 2017 say that United is not being punished by the market for having inferior hubs.
On the other hand, United make a lot of “changes you will like”, changes that I and others have said with each change cumulatively would drive away traffic:
(1) Going with SHARES (developed for Eastern Airline) so as to save $$$$, with minimal training on the sUA side and no modern interface.
(2) Deciding to merge the FF programs with increase in benefits to sCO elites, loss of benefits to sUA elites, because “we had to draw a line somewhere”
(3) Cutting back CS compensation with a the CO pound sand approach to CS issues
(4) Cutting domestic capacity by retiring old sCO 737s and sUA 757s and converting domestic 763/772s to international planes.
(5) Aggressive cross-fleeting w/o a joint labor agreement
(6) Using sCO 135/145 RJs on long/business flights out of sUA hubs
(7) Using RJs on major business routes
(8) Setting IRROPs rules to make it hard to rebook and restrict off-line rebooking, including for GS (at least in 2012-2013)
(9) Setting a low 80% OT goal as “there are diminishing returns above 80% OT”
(10) Cutting back MM/2MM benefits
(11) Cutting back FF redemption availability and raising the price dramatically, “non-pass”
(12) Cutting back E+ pitch
(13) Putting horrible slime-lines on the A320/A319, not doing anything on F
(14) Pulling out IFE, taking dark planes
(15) Putting last gen, sCO J seats in new/refurbished aircraft
(16) Cutting back on food service/quality in domestic F, and major cuts to PS/J/F food service and quality, also cuts to Y catering
(17) Cutting out all quality booze, including in F/J. United is the “bud, beem, and white label airline”
(18) Setting the wine price points as $5/bottle in domestic F, $12/bottle in J, $15 in F
(19) Freshpoo all around, taking expresso off the sCO birds
(20) Not upgrading the clubs, and when new clubs were done, no showers, and clubs are small.
(21) Not matching OALs in food/drinks in clubs, going with frat party booze
(22) No pillows on domestic F, thin tissue blankets, if you can find them
(23) No widebodies to Hawaii.
(24) No special service to Hawaii
(25) Outsourcing most/all non-hub stations
(26) Not getting labor contracts, waiting for Unions to give in. trying to hire people on the sCO side and attrite the sUA side
(27) BOB in international flights, no mid-flight snack/food.
(28) Selling TOD upgrades at every opportunity
I could go one, this is just the “Smisek/Smith Street Crew” list, feel free to add any that I missed.
I'm sure someone can add another 10-12 "enhancements." We know the more recent Kirby/Oscar downgrades, and also the few actual things they did to make the passenger experience better.
Bottom line, United made a lot of decisions – every single one of which – lowered the value proposition of flying United. The result is inferior hard and soft product and CS and a mileage program that is no longer leading, and as to things like upgrades and requiring GPUs be on fares that are $800+ more on all but close in purchase, offers less than other programs do. The only counter value (and why they projected synergies) was a larger network.
United has admitted on a number of occasions that they lost valuable traffic, and as I have shown on many occasions, PRASM has had a comparative decrease has been on going since Jeff took over, and it reversed increases which United had made in 2010/2011.
p.s. I will concede one point, which is that PMCO with its fortress hub focused operation, had been cutting back on FF benefits (having started TODs and highly discounted F) and its product steadily for a few years before the merger, and it had not hurt comparative PRASM. In their arrogance and ignorance (a bad combo IMHO) they assumed this approach would work in highly competitive UA markets. That was the big mistake with the merger, one that United unfortunately has never been able to reverse (which is a point that J. Edward made above). As such I think the situation is 180 degrees the opposite of how you see it. United had the wrong strategy for its post merger network, which had the potential to attract yet more high value traffic, given how great the network was, but instead of setting service levels these mobile travelers would find acceptable, UA pretended it was an airline with captive hubs. that did not work out so well...
Hubs in 4 largest U.S. cities
Serving the most destinations in the U.S
Merger created global network with unsurpassed scope
Serving the right markets, with the right assets, #1 across the pacific, #1 in US/Canada, #2 to Latin America, #2 across the atlantic
United is generating industry leading results
Revenue – Leads network carriers
Pre-tax margin – leads network carriers
Liquidity – leads network carriers
United leads U.S. network carriers in unit revenue and margin [and by “unit revenue” them mean PRASM ;0]
Have captured more than $130M in synergies year-to-date On track to achieve 25% of $1.0 – 1.2B run rate synergies in 2011
And the plan: “Expect 2012 consolidated capacity to be flat Reduce domestic capacity while growing international”
P.s. I did not just make this up �� https://www.sec.gov/Archives/edgar/d...2148dex991.htm
Delta - with the same "fortress hubs" you claim UA lacks, hence their failure to do well - was behind UA+CO in all respects. UA's fortress hubs (IAH, EWR) had much higher revenue premiums in any event. To the extent the hub networks changed, DL made major changes, which involved it expanding/going into highly competitive markets, JFK, SEA, WestCoast, LAX. United in turn pulled back from highly competitive markets like SEA, LAX, JFK. The actual evidence re the networks in 2012 vs. 2017 say that United is not being punished by the market for having inferior hubs.
On the other hand, United make a lot of “changes you will like”, changes that I and others have said with each change cumulatively would drive away traffic:
(1) Going with SHARES (developed for Eastern Airline) so as to save $$$$, with minimal training on the sUA side and no modern interface.
(2) Deciding to merge the FF programs with increase in benefits to sCO elites, loss of benefits to sUA elites, because “we had to draw a line somewhere”
(3) Cutting back CS compensation with a the CO pound sand approach to CS issues
(4) Cutting domestic capacity by retiring old sCO 737s and sUA 757s and converting domestic 763/772s to international planes.
(5) Aggressive cross-fleeting w/o a joint labor agreement
(6) Using sCO 135/145 RJs on long/business flights out of sUA hubs
(7) Using RJs on major business routes
(8) Setting IRROPs rules to make it hard to rebook and restrict off-line rebooking, including for GS (at least in 2012-2013)
(9) Setting a low 80% OT goal as “there are diminishing returns above 80% OT”
(10) Cutting back MM/2MM benefits
(11) Cutting back FF redemption availability and raising the price dramatically, “non-pass”
(12) Cutting back E+ pitch
(13) Putting horrible slime-lines on the A320/A319, not doing anything on F
(14) Pulling out IFE, taking dark planes
(15) Putting last gen, sCO J seats in new/refurbished aircraft
(16) Cutting back on food service/quality in domestic F, and major cuts to PS/J/F food service and quality, also cuts to Y catering
(17) Cutting out all quality booze, including in F/J. United is the “bud, beem, and white label airline”
(18) Setting the wine price points as $5/bottle in domestic F, $12/bottle in J, $15 in F
(19) Freshpoo all around, taking expresso off the sCO birds
(20) Not upgrading the clubs, and when new clubs were done, no showers, and clubs are small.
(21) Not matching OALs in food/drinks in clubs, going with frat party booze
(22) No pillows on domestic F, thin tissue blankets, if you can find them
(23) No widebodies to Hawaii.
(24) No special service to Hawaii
(25) Outsourcing most/all non-hub stations
(26) Not getting labor contracts, waiting for Unions to give in. trying to hire people on the sCO side and attrite the sUA side
(27) BOB in international flights, no mid-flight snack/food.
(28) Selling TOD upgrades at every opportunity
I could go one, this is just the “Smisek/Smith Street Crew” list, feel free to add any that I missed.
I'm sure someone can add another 10-12 "enhancements." We know the more recent Kirby/Oscar downgrades, and also the few actual things they did to make the passenger experience better.Bottom line, United made a lot of decisions – every single one of which – lowered the value proposition of flying United. The result is inferior hard and soft product and CS and a mileage program that is no longer leading, and as to things like upgrades and requiring GPUs be on fares that are $800+ more on all but close in purchase, offers less than other programs do. The only counter value (and why they projected synergies) was a larger network.
United has admitted on a number of occasions that they lost valuable traffic, and as I have shown on many occasions, PRASM has had a comparative decrease has been on going since Jeff took over, and it reversed increases which United had made in 2010/2011.
p.s. I will concede one point, which is that PMCO with its fortress hub focused operation, had been cutting back on FF benefits (having started TODs and highly discounted F) and its product steadily for a few years before the merger, and it had not hurt comparative PRASM. In their arrogance and ignorance (a bad combo IMHO) they assumed this approach would work in highly competitive UA markets. That was the big mistake with the merger, one that United unfortunately has never been able to reverse (which is a point that J. Edward made above). As such I think the situation is 180 degrees the opposite of how you see it. United had the wrong strategy for its post merger network, which had the potential to attract yet more high value traffic, given how great the network was, but instead of setting service levels these mobile travelers would find acceptable, UA pretended it was an airline with captive hubs. that did not work out so well...
Oct 24, 2017, 10:37 am
#153
Join Date: Feb 2008
Programs: 6 year GS, now 2MM Jeff-ugee, *wood LTPlt, SkyPeso PLT
Posts: 6,526
Both (xCLE) , EWR and IAH are relatively insulated from competition, while SFO, LAX, IAD,DEN are highly competitive, if large markets. UA offered great benefits to elites, and used MileagePlus as a competitive driver to keep people on-metal as much as possible.
CO's mentality was that people had no choice, and that worked when you're in CLE, EWR and IAH. It doesn't work in competitive markets.
CO's mentality was that people had no choice, and that worked when you're in CLE, EWR and IAH. It doesn't work in competitive markets.
""Advanced technology aircraft like the 787-10 are key to United’s future, enabling us to fly fuel-efficient, customer-pleasing aircraft that are the right size for many long-haul markets in our unparalleled network," said Jeff Smisek"
http://articles.chicagotribune.com/2...787-dreamliner
funny how the exact same business plan of cuts to produce and service is now being defended on the basis that United has the worst network, and well product and service don't matter, people buy on price.
Fact? We don't need no stinking facts. The plan is religion. It must be believed.
UA/CO each built their networks on the premise feeding int'l long haul as emerging markets grew was the winning bet for maximizing profit.
DL went on the premise of having a strong consolidated domestic network where fortress hubs give the margin to go and invest in the more competitive big city markets, where there is higher RASM, but lower margin.
The UA/CO bet was the right one for the 2000s, wrong one for the 2010s cycle.
We don't have the numbers, but I would bet margins on long haul int'l have taken a beating at all the US majors since 2010, while domestic margins have increased remarkably for DL/AA, with most of that gain in the hubs. We know for a fact from DL NYC has been a loss maker to now modest margin business for them, but well below the systemwide margin.
DL went on the premise of having a strong consolidated domestic network where fortress hubs give the margin to go and invest in the more competitive big city markets, where there is higher RASM, but lower margin.
The UA/CO bet was the right one for the 2000s, wrong one for the 2010s cycle.
We don't have the numbers, but I would bet margins on long haul int'l have taken a beating at all the US majors since 2010, while domestic margins have increased remarkably for DL/AA, with most of that gain in the hubs. We know for a fact from DL NYC has been a loss maker to now modest margin business for them, but well below the systemwide margin.
I also think you are wrong re DL. DL never had an international presence to speak of. Yet they set about building the network they wanted (and had not gotten with the NW merger) this was a major presence in JFK, LAX, and SEA. Delta was laying the ground work for its current - and very profitable - push, not simply coasting on its domestic network.
Oct 24, 2017, 11:43 am
#155
A FlyerTalk Posting Legend
Join Date: Jun 2005
Posts: 57,601
I think you give way too much credit to Jeff and his crew. They were actually just reacting to their past experiences when CO had too little international capacity and now they got to play in the big leagues, yippy! They went on a binge and thought that they could leave SWA behind them. The fact that overseas carriers had lower labor rates and were IMPROVING their service and product dramatically, well that was just not something worth noting, because, well, people had to fly the merged UA+CO network due to how great they were. Had UA's management had even the smallest amount of common sense and even an iota less arrogence, they would have seen that the competition was comming at them overseas with better products and service. But alas, UA gutted its product and service.
Oct 24, 2017, 11:55 am
#156
FlyerTalk Evangelist
Join Date: Feb 2002
Location: San Francisco/Tel Aviv/YYZ
Programs: CO 1K-MM
Posts: 10,762
UA/CO each built their networks on the premise feeding int'l long haul as emerging markets grew was the winning bet for maximizing profit.
DL went on the premise of having a strong consolidated domestic network where fortress hubs give the margin to go and invest in the more competitive big city markets, where there is higher RASM, but lower margin.
The UA/CO bet was the right one for the 2000s, wrong one for the 2010s cycle.
We don't have the numbers, but I would bet margins on long haul int'l have taken a beating at all the US majors since 2010, while domestic margins have increased remarkably for DL/AA, with most of that gain in the hubs. We know for a fact from DL NYC has been a loss maker to now modest margin business for them, but well below the systemwide margin.
DL went on the premise of having a strong consolidated domestic network where fortress hubs give the margin to go and invest in the more competitive big city markets, where there is higher RASM, but lower margin.
The UA/CO bet was the right one for the 2000s, wrong one for the 2010s cycle.
We don't have the numbers, but I would bet margins on long haul int'l have taken a beating at all the US majors since 2010, while domestic margins have increased remarkably for DL/AA, with most of that gain in the hubs. We know for a fact from DL NYC has been a loss maker to now modest margin business for them, but well below the systemwide margin.
CO flew their enormous (har) widebody fleet to wider array of international destinations and exotic locations like LGW because they couldn't get into LHR. they did blaze a trail into secondary European markets with the 752 and offered barbie dream jet service from IAH to pretty much every landing strip long enough in Mexico.
Now that everyone can fly into LHR, the yield premium there evaporated, and TATL LCC's are picking off a bunch of the "cabin filling" VFR traffic, those yields are tanking too.
CO was right on their int'l strategy but they bet everything on the 787 and when it was years and years late, DL took their huge domestic fleet of widebodies and just cleaned up on their int'l expansion.
Oct 24, 2017, 11:59 am
#157
Join Date: Apr 2004
Location: Washington, DC
Posts: 1,309
DL International Presence
What on earth are you talking about? Delta certainly had an international presence, going back a long way. Througout the 1980s they built up a large presence in Europe, going to 10 cities in Europe from hubs in Atlanta, Cincinnati, Dallas and Orlando by 1991. United, by contrast, was largely domestic until it acquired its Pacific routes in 1985 and only started Europe in 1990 with Frankfurt and Paris flights. I just woundt consider this to be indicative of not having "...an international presence to speak of".
http://www.departedflights.com/DLwinter91intl.html
Delta in 1991/1992 blew up in Europe/JFK with its purchase of Pan Am's JFK operation, including a decent-size Frankfurt hub. Sure, Delta spent years optimizing this, and incrementally building it up, but to say they really didnt do much until recently (paraphrasing) is misleading.
I also think you are wrong re DL. DL never had an international presence to speak of. Yet they set about building the network they wanted (and had not gotten with the NW merger) this was a major presence in JFK, LAX, and SEA. Delta was laying the ground work for its current - and very profitable - push, not simply coasting on its domestic network.
http://www.departedflights.com/DLwinter91intl.html
Delta in 1991/1992 blew up in Europe/JFK with its purchase of Pan Am's JFK operation, including a decent-size Frankfurt hub. Sure, Delta spent years optimizing this, and incrementally building it up, but to say they really didnt do much until recently (paraphrasing) is misleading.
I also think you are wrong re DL. DL never had an international presence to speak of. Yet they set about building the network they wanted (and had not gotten with the NW merger) this was a major presence in JFK, LAX, and SEA. Delta was laying the ground work for its current - and very profitable - push, not simply coasting on its domestic network.
Oct 24, 2017, 12:03 pm
#158
Join Date: Oct 2017
Programs: SPG, Marriott, UA, AA, CX, SQ
Posts: 165
I'm thoroughly impressed that people pick carriers based on how successful they were at gouging you, aka the pre tax margin, instead of practical things like price, schedule, and route network.
If you think the profitable airlines are actually investing back into their route network, I have a slot authority for Boston to Chicago to sell you /sarcasm
Toyota is more profitable than Bugatti so I guess following the logic around here I should just settle for a Corolla.
SMH FACE PALM
If you think the profitable airlines are actually investing back into their route network, I have a slot authority for Boston to Chicago to sell you /sarcasm
Toyota is more profitable than Bugatti so I guess following the logic around here I should just settle for a Corolla.
SMH FACE PALM
Oct 24, 2017, 12:18 pm
#159
Join Date: Feb 2008
Programs: 6 year GS, now 2MM Jeff-ugee, *wood LTPlt, SkyPeso PLT
Posts: 6,526
I'm thoroughly impressed that people pick carriers based on how successful they were at gouging you, aka the pre tax margin, instead of practical things like price, schedule, and route network.
If you think the profitable airlines are actually investing back into their route network, I have a slot authority for Boston to Chicago to sell you /sarcasm
Toyota is more profitable than Bugatti so I guess following the logic around here I should just settle for a Corolla.
SMH FACE PALM
If you think the profitable airlines are actually investing back into their route network, I have a slot authority for Boston to Chicago to sell you /sarcasm
Toyota is more profitable than Bugatti so I guess following the logic around here I should just settle for a Corolla.
SMH FACE PALM
Their current business model is trying to sell a SAV-like experience at the slightly higher price point.I was not talking 1980s, nor the 1960s, or even the 1930s. I was talking the state of play when the current round of mergers took place, DL+NW in 2008, UA+CO in 2010. Delta at that time was not a major international player, and even when NW was added, DL's overseas route network trailed United+CO's by a lot.
Last edited by spin88; Oct 24, 2017 at 12:24 pm
Oct 24, 2017, 12:23 pm
#160
Join Date: Oct 2017
Programs: SPG, Marriott, UA, AA, CX, SQ
Posts: 165
Welcome to FT! If you buy on "price, scheduled and route network" and service and product quality play no part in your buying decision (the subject of discussion) then you are a customer who will warm the coocles of UAL's heart. Their current business model is trying to sell a SAV-like experience at the slightly higher price point.
Their current business model is trying to sell a SAV-like experience at the slightly higher price point.
Oct 24, 2017, 12:32 pm
#161
Join Date: Apr 2004
Location: Washington, DC
Posts: 1,309
still wrong
Delta had quite a large Atlantic network in 2008 and had substantially grown JFK, was beefing up Paris service, and still had a large network of flying to over 15 European destinations from Atlanta and JFK (and even still Cincinnati). That is not small. while they only flew to Tokyo in Asia just prior to the merger with Northwest, by 2008 they did serve every major city in South America. They were certainly no slouch in the international arena. Not quite sure what you're talking about.
Welcome to FT! If you buy on "price, scheduled and route network" and service and product quality play no part in your buying decision (the subject of discussion) then you are a customer who will warm the coocles of UAL's heart. Their current business model is trying to sell a SAV-like experience at the slightly higher price point.
I was not talking 1980s, nor the 1960s, or even the 1930s. I was talking the state of play when the current round of mergers took place, DL+NW in 2008, UA+CO in 2010. Delta at that time was not a major international player, and even when NW was added, DL's overseas route network trailed United+CO's by a lot.
Their current business model is trying to sell a SAV-like experience at the slightly higher price point.I was not talking 1980s, nor the 1960s, or even the 1930s. I was talking the state of play when the current round of mergers took place, DL+NW in 2008, UA+CO in 2010. Delta at that time was not a major international player, and even when NW was added, DL's overseas route network trailed United+CO's by a lot.
Oct 24, 2017, 12:32 pm
#162
Join Date: Mar 2011
Location: NYC LAX RDU
Programs: US-Plt;Concierge key; American AAirpass; Delta Silver;Starwood - Platinum; Amex Cent
Posts: 710
The 'ugly girl' brought to the table an incredible fortress connecting hub with low costs in CLT, and a couple decent ones in PHL / PHX without any crosstown competition, along with a lean reliability philosophy.
It was accretive to AA performance simply based on that, and directing more resources to bolster, especially CLT.
UA/CO from the start had a fragile hub hand. Every hub but Denver has crosstown airport capacity that dilutes the market, makes room for competition, and all are relatively high cost vs the CLT, ATLs of the world.
You can have the best product in the world and you'll trail on domestic financial returns with the UA hub hand vs DL/AA.
The bet with UA was Asia and other emerging markets would be so wildly profitable it would offset that, but the Chinese carrier capacity dump put a damper on that.
It was accretive to AA performance simply based on that, and directing more resources to bolster, especially CLT.
UA/CO from the start had a fragile hub hand. Every hub but Denver has crosstown airport capacity that dilutes the market, makes room for competition, and all are relatively high cost vs the CLT, ATLs of the world.
You can have the best product in the world and you'll trail on domestic financial returns with the UA hub hand vs DL/AA.
The bet with UA was Asia and other emerging markets would be so wildly profitable it would offset that, but the Chinese carrier capacity dump put a damper on that.
Oct 24, 2017, 12:32 pm
#163
Join Date: Jan 2005
Location: New York, NY
Programs: UA, AA, DL, Hertz, Avis, National, Hyatt, Hilton, SPG, Marriott
Posts: 9,452
Fact? We don't need no stinking facts.
. . .
I also think you are wrong re DL. DL never had an international presence to speak of. Yet they set about building the network they wanted (and had not gotten with the NW merger) this was a major presence in JFK, LAX, and SEA. Delta was laying the ground work for its current - and very profitable - push, not simply coasting on its domestic network.
. . .
I also think you are wrong re DL. DL never had an international presence to speak of. Yet they set about building the network they wanted (and had not gotten with the NW merger) this was a major presence in JFK, LAX, and SEA. Delta was laying the ground work for its current - and very profitable - push, not simply coasting on its domestic network.
Where has it been documented that Delta's SEA expansion has been profitable? If that really were the case, it would be one of the more remarkable organic growth stories in the history of the commercial airline business... even more stunning in view of the fact that AS has nearly matched DL's growth AND other carriers have admitted SEA is, in so many words, a bloodbath.
More likely is that Delta's margins are so strong in ATL, SLC, MSP, DTW, et al. that its growth elsewhere (LAX, SEA, RDU, BOS) can be justified to the street, allowing Delta management enough leeway to carry such expansion to maturity.
It's certainly not a knock on DL, but I don't know if those markets you cite are "very" profitable when viewed alongside other markets which are unquestionably Delta's margin drivers.
UA didn't bet that way buddy. UA bet on their trunk international routes and rewarding their best customers like gold.
CO flew their enormous (har) widebody fleet to wider array of international destinations and exotic locations like LGW because they couldn't get into LHR. they did blaze a trail into secondary European markets with the 752 and offered barbie dream jet service from IAH to pretty much every landing strip long enough in Mexico.
Now that everyone can fly into LHR, the yield premium there evaporated, and TATL LCC's are picking off a bunch of the "cabin filling" VFR traffic, those yields are tanking too.
CO was right on their int'l strategy but they bet everything on the 787 and when it was years and years late, DL took their huge domestic fleet of widebodies and just cleaned up on their int'l expansion.
CO flew their enormous (har) widebody fleet to wider array of international destinations and exotic locations like LGW because they couldn't get into LHR. they did blaze a trail into secondary European markets with the 752 and offered barbie dream jet service from IAH to pretty much every landing strip long enough in Mexico.
Now that everyone can fly into LHR, the yield premium there evaporated, and TATL LCC's are picking off a bunch of the "cabin filling" VFR traffic, those yields are tanking too.
CO was right on their int'l strategy but they bet everything on the 787 and when it was years and years late, DL took their huge domestic fleet of widebodies and just cleaned up on their int'l expansion.
United also had, and retains, the benefit of hub markets with strong local international demand, which were less exposed to competition in 2010 than 2017. This speaks directly to your point of the restricted-access markets in which UA drove a revenue premium due to its incumbent position (LHR/NRT), but the dynamics have changed there too.
The strategy isn't dead, though, as you may recall Kirby's point in a past earnings call, using Erie, PA to Paris as an example of a market somewhat insulated from the pricing pressure seen elsewhere, and thus an opportunity for United to rely on connectivity to drive a premium. Unfortunately, reduced capacity in the domestic market and a rolling hub concept post-merger made UA less competitive for that traffic when compared to other carriers with shorter connections, larger gauge and better frequency.
Oct 24, 2017, 12:36 pm
#164
Join Date: Feb 2008
Programs: 6 year GS, now 2MM Jeff-ugee, *wood LTPlt, SkyPeso PLT
Posts: 6,526
my time is precious, so nonstops means everything. Since your time isn't worth much because you don't value schedules and networks, be my guest and enjoy the world-class beverage service that DL provides on your multi-hop itinerary. (SFO-SIN is minimum 2 stops on DL metal)
You are welcome to take United's last gen J product SFO-SIN, and you are welcome to fly in a seat which is .2" narrower than a 737 in E+. Neither are very appetizing prospects to me for 16+ hours, given I can find other options that are better for a similar price.
Oct 24, 2017, 12:43 pm
#165
Join Date: Oct 2017
Programs: SPG, Marriott, UA, AA, CX, SQ
Posts: 165
If I was going to SFO-SIN (I am not) I would take SQ (in either PE or J) so what exactly is your point? And if J pricing was too wacky I would take CX or EVA or a Japanese or Korean carrier in either PE or J.
You are welcome to take United's last gen J product SFO-SIN, and you are welcome to fly in a seat which is .2" narrower than a 737 in E+. Neither are very appetizing prospects to me for 16+ hours, given I can find other options that are better for a similar price.
You are welcome to take United's last gen J product SFO-SIN, and you are welcome to fly in a seat which is .2" narrower than a 737 in E+. Neither are very appetizing prospects to me for 16+ hours, given I can find other options that are better for a similar price.
And your second statement exactly proved my point - your time isn't precious whatsoever and you'll be doing double and triple connects instead of flying nonstop