UA Q4/Full Year 2017 Results/Conference Call 23 Jan 2018
Jan 28, 2018, 4:26 pm
#91
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Not that I have read the financials closely, but anyone who has flown Polaris over the course of the past 12 months can point you to cost savings right there - the degradation of a 'new' business class product to the point where in some instances, it is worse than the old BF service, and with new hard product that you basically won't encounter unless you fly ULH ex-SFO.
Jan 28, 2018, 4:29 pm
#92
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I read somewhere that UA admitted they were losing money with Basic Economy and that they were going to change it up a bit, including giving passengers the benefit of paying for seat assignments/upgrades. Was this mentioned in this conference call or did I get this info from somewhere else?
Jan 28, 2018, 4:34 pm
#93
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I never said there has never been more 2-class service at DAY. Anyone who goes back can see I never said that. I'd appreciate it if you don't misconstrue statements. I asked you if you had any evidence multiple times after you made the first claims that UA has been "getting their clock cleaned" on ORD-DAY, yet your answer is essentially "trust me because I commonly fly from DAY". The burden of truth is on you. You made the claims. I do have some evidence to either support or deny your evidence when we see it. But not before.
Let's revisit a December post of yours, where you claim UA is ceding market share. Now again you don't have evidence to back it up, and you make inference that it goes beyond the IAD/EWR-DAY specifically talked about (ZW doesn't even fly EWR-DAY). So as a data point of interest, let's take all of DAY and see what UA's share of traffic has been there since 2012, the first year of fully combined UA/CO ops (starting with that year): 17.4%, 17.9%, 17.4%, 18.3%, 17.6%, 17.0%. mduell's table indicates about a 10% increase in capacity this year, so they could have their largest share there this year since after the merger, meaning UA is planning to compete for more DAY market share. I guess we will find out as the year goes on whether your belief that it won't increase market share isn't a "winning strategy". Either way UA has had a very consistent market share at DAY in the past 6 years, providing evidence that the issue isn't UA for shrinking schedules, it's DAY demand as a whole. As a whole airlines are shrinking there.
No, that would be a very incorrect interpretation. That assumes universal choice of carriers, which we know isn't true.
Ironically a lack of choice is a key factor in who pays more for the "privilege" of flying certain carriers. And a simple hypothetical question tells us that in a commodity market that the "experience" has little to do with it, unless we're talking about negative operational "experiences", in which case DL has had many troubles lately. Let's ask a hypothetical question in a simple market. Let's say DL raises their prices to be $20 over a directly competing carrier (a generic UA), in this case a fixed $240 instead of a fixed $220. The demand in this certain market at a fixed $220 price level is a combined 80% load factor, meaning there is excess capacity available. In this example, the exact load factor ratio between the two at the $220 price level doesn't matter. After DL universally raises their price to $240, do you believe their load factor would hold constant and their PRASM would increase by that 9% yield increase, holding every else constant, including the same basic service (transportation) and product that DL offers now? Or is it conceivable that the competing airline would gain load factor and possibly PRASM?
P.S. UA's is doing remarkably well on the cost side versus DL and AA. Not sure how they're doing it, but the difference was large in Q4.
Let's revisit a December post of yours, where you claim UA is ceding market share. Now again you don't have evidence to back it up, and you make inference that it goes beyond the IAD/EWR-DAY specifically talked about (ZW doesn't even fly EWR-DAY). So as a data point of interest, let's take all of DAY and see what UA's share of traffic has been there since 2012, the first year of fully combined UA/CO ops (starting with that year): 17.4%, 17.9%, 17.4%, 18.3%, 17.6%, 17.0%. mduell's table indicates about a 10% increase in capacity this year, so they could have their largest share there this year since after the merger, meaning UA is planning to compete for more DAY market share. I guess we will find out as the year goes on whether your belief that it won't increase market share isn't a "winning strategy". Either way UA has had a very consistent market share at DAY in the past 6 years, providing evidence that the issue isn't UA for shrinking schedules, it's DAY demand as a whole. As a whole airlines are shrinking there.
No, that would be a very incorrect interpretation. That assumes universal choice of carriers, which we know isn't true.
Ironically a lack of choice is a key factor in who pays more for the "privilege" of flying certain carriers. And a simple hypothetical question tells us that in a commodity market that the "experience" has little to do with it, unless we're talking about negative operational "experiences", in which case DL has had many troubles lately. Let's ask a hypothetical question in a simple market. Let's say DL raises their prices to be $20 over a directly competing carrier (a generic UA), in this case a fixed $240 instead of a fixed $220. The demand in this certain market at a fixed $220 price level is a combined 80% load factor, meaning there is excess capacity available. In this example, the exact load factor ratio between the two at the $220 price level doesn't matter. After DL universally raises their price to $240, do you believe their load factor would hold constant and their PRASM would increase by that 9% yield increase, holding every else constant, including the same basic service (transportation) and product that DL offers now? Or is it conceivable that the competing airline would gain load factor and possibly PRASM?
P.S. UA's is doing remarkably well on the cost side versus DL and AA. Not sure how they're doing it, but the difference was large in Q4.
DL PLF 85.6, UA PLF 82.4. This earned over $30/pax revenue premium in 2017. Are you saying demand makes the price go down?
Jan 29, 2018, 6:23 am
#94
Join Date: Feb 2002
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Interesting analysis by Brett Snyder
A Conversation With Myself About United?s Domestic Growth Plan | Cranky Flier
"Scott looks at United’s domestic hubs and sees the best possible hubs in the US, but I’m not as convinced. Yes, United has hubs in the cities that have the most local traffic demand, and they are geographically-positioned well for connections. (Let’s not talk about the lack of ability to serve the Southeast. The rest of the country is well-served by United’s hubs.) The problem here is that these hubs may have the most local traffic, but that’s why low cost carriers flock to them when they can get gates/slots. So United finds increasingly that nonstop routes are taking a beating on fare levels. Delta doesn’t have that problem nearly as much in places like Minneapolis and Detroit. Same goes for American in Charlotte. More local demand is a double-edged sword."
A Conversation With Myself About United?s Domestic Growth Plan | Cranky Flier
"Scott looks at United’s domestic hubs and sees the best possible hubs in the US, but I’m not as convinced. Yes, United has hubs in the cities that have the most local traffic demand, and they are geographically-positioned well for connections. (Let’s not talk about the lack of ability to serve the Southeast. The rest of the country is well-served by United’s hubs.) The problem here is that these hubs may have the most local traffic, but that’s why low cost carriers flock to them when they can get gates/slots. So United finds increasingly that nonstop routes are taking a beating on fare levels. Delta doesn’t have that problem nearly as much in places like Minneapolis and Detroit. Same goes for American in Charlotte. More local demand is a double-edged sword."
Jan 29, 2018, 6:31 am
#95
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I am think part of the basis for his strategy is these smaller markets have few frequencies on DL / AA so there are times of the day as well as onward connections that just don’t have an alternative.
For example if you want to go ILM-SAN and want a travel time under 8 hours...
Theres
ILM-ATL 6am
ILM-IAD 10:30am
ILM-CLT 2:20pm
ILM-ATL 4:55pm
ILM-ATL 6:20pm
So UA slotted in during an 8 hour gap in the schedule. The prime time slots are taken but if you happen to be someone who doesn’t want the ultra early wake up UA is your choice.
Then let’s look at long haul like ILM-GRU
If you want just one stop there’s
6:05pm ATL - 2 hr layover
7:55pm IAD - 1hr layover
Riskier connection here but it gives more time working in ILM and shows up higher in search results (shorter ttrip). More important - only 2 airlines not 3 duking it out.
Bismarck - NYC
5am DL 2 cabin
6:20 UA single
6:55am DL 2 cabin
10:55 DL 2 cabin
12:55 UA 1 cabin
1:20 DL 1 cabin
3:20 AA 2 cabin
5:39 DL 2 cabin
Not great on the early morning - fills a hole during the midday when DL is running single cabin.
Will it achieve his numbers? No idea - clearly we all would rather see 2 cabin on every route - but it’s not as cut and dry as throwing single cabin planes on saturated routes like ORD-NYC.
As I mentioned up thread, if United is adding all these CR2s to compete directly with OAL 1 cabin service at airports where they didn't have any service at all, I totally get that.
But I don't think that is the case. The schedule is a very complex puzzle. I wouldn't think that finding holes in competitor's schedules would be a prime consideration. Asset availability and utilization, along with the repeating theme of "re-banking" would have to take precedence.
I never said there has never been more 2-class service at DAY. Anyone who goes back can see I never said that. I'd appreciate it if you don't misconstrue statements. I asked you if you had any evidence multiple times after you made the first claims that UA has been "getting their clock cleaned" on ORD-DAY, yet your answer is essentially "trust me because I commonly fly from DAY". The burden of truth is on you. You made the claims. I do have some evidence to either support or deny your evidence when we see it. But not before.
Let's revisit a December post of yours, where you claim UA is ceding market share. Now again you don't have evidence to back it up, and you make inference that it goes beyond the IAD/EWR-DAY specifically talked about (ZW doesn't even fly EWR-DAY). So as a data point of interest, let's take all of DAY and see what UA's share of traffic has been there since 2012, the first year of fully combined UA/CO ops (starting with that year): 17.4%, 17.9%, 17.4%, 18.3%, 17.6%, 17.0%. mduell's table indicates about a 10% increase in capacity this year, so they could have their largest share there this year since after the merger, meaning UA is planning to compete for more DAY market share. I guess we will find out as the year goes on whether your belief that it won't increase market share isn't a "winning strategy". Either way UA has had a very consistent market share at DAY in the past 6 years, providing evidence that the issue isn't UA for shrinking schedules, it's DAY demand as a whole. As a whole airlines are shrinking there.
...
Let's revisit a December post of yours, where you claim UA is ceding market share. Now again you don't have evidence to back it up, and you make inference that it goes beyond the IAD/EWR-DAY specifically talked about (ZW doesn't even fly EWR-DAY). So as a data point of interest, let's take all of DAY and see what UA's share of traffic has been there since 2012, the first year of fully combined UA/CO ops (starting with that year): 17.4%, 17.9%, 17.4%, 18.3%, 17.6%, 17.0%. mduell's table indicates about a 10% increase in capacity this year, so they could have their largest share there this year since after the merger, meaning UA is planning to compete for more DAY market share. I guess we will find out as the year goes on whether your belief that it won't increase market share isn't a "winning strategy". Either way UA has had a very consistent market share at DAY in the past 6 years, providing evidence that the issue isn't UA for shrinking schedules, it's DAY demand as a whole. As a whole airlines are shrinking there.
...
Yeah, what I thought. You are now throwing ASMs into the conversation, and admitted UAs declining market share over the past 3 years, but didn't address the 2 cabin issue at all.
I should have recalled that this is a wasted excercise.
Jan 29, 2018, 6:59 am
#96
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That is an interesting train of thought.
As I mentioned up thread, if United is adding all these CR2s to compete directly with OAL 1 cabin service at airports where they didn't have any service at all, I totally get that.
But I don't think that is the case. The schedule is a very complex puzzle. I wouldn't think that finding holes in competitor's schedules would be a prime consideration. Asset availability and utilization, along with the repeating theme of "re-banking" would have to take precedence.
Yeah, what I thought. You are now throwing ASMs into the conversation, and admitted UAs declining market share over the past 3 years, but didn't address the 2 cabin issue at all.
I should have recalled that this is a wasted excercise.
As I mentioned up thread, if United is adding all these CR2s to compete directly with OAL 1 cabin service at airports where they didn't have any service at all, I totally get that.
But I don't think that is the case. The schedule is a very complex puzzle. I wouldn't think that finding holes in competitor's schedules would be a prime consideration. Asset availability and utilization, along with the repeating theme of "re-banking" would have to take precedence.
Yeah, what I thought. You are now throwing ASMs into the conversation, and admitted UAs declining market share over the past 3 years, but didn't address the 2 cabin issue at all.
I should have recalled that this is a wasted excercise.
United's strategy - toss out lots of inferior product (single class RJs), often at mid-day time, cut product quality (you want IFE, pound sand, get our app, power in Y outside of E+, haaaaa, haaaaa, haaaaa sucka) - will as the OP suggests pick up some people just buying on price, people who don't know to avoid a less than 1 hour connection on UA. But it does nothing to attract either of the more valuable group of business travelers, and the most valuable travelers (the FFs who Kirby says provide 1/2 of the revenue. Let me repeat that, FFers provide 1/2 of United's (and he implied AA's) revenue).
United needs to compete by standing out in some good way. It can go back to having a very good FF program with some stand out features (none-pass used to give comp upgrades, mileage plus used to actually offer reward travel that you could actually get, plus SWUs at 1K, good elite service). It can distinguish itself with good soft product (anyone remember when CO offered very good domestic F food?). Or good hard product (anyone remember when IPTE was the leading product?). But United is simply adding a lot of capacity that is only going to appeal to price sensitive traffic that does not know better than to avoid what UA is offering, but will likely learn to avoid UA after they experience what UA has to offer.
Jan 29, 2018, 9:50 am
#97
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Something else interesting I noticed last week. Some search interfaces will not return results on single-cabin aircraft when you search for Business or First Class.
I was using google flights for some searches, and was perplexed when United wasn't showing up as an option at all. Then realized I was searching for Business Class, and since United didn't offer 2-cabin planes, they just didn't show up in the results.
I was using google flights for some searches, and was perplexed when United wasn't showing up as an option at all. Then realized I was searching for Business Class, and since United didn't offer 2-cabin planes, they just didn't show up in the results.
Jan 29, 2018, 5:09 pm
#98
Join Date: Apr 2011
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Take a shot at the hypothetical question.
I didn't say it proved anything regarding 1-class/2-class. It doesn't. I said it was a "data point of interest". And the reason it's interesting is because it doesn't agree with your assertions that increased 1-class service has been a key trigger for UA's reduced footprint at DAY. If your 1-class claims are indeed true and the effect of that is negative, we should see a defined market share loss over the long-run (and a potential trend rebound or flattening in 2017 due to mduell's stats that showed a YOY gain in 2-class service). But we don't see that, hence the data doesn't agree. It doesn't prove your claims are wrong, but it certainly leaves them more in doubt.
I'm still waiting on your evidence on 2-class service to ORD.
Last edited by WineCountryUA; Jan 29, 2018 at 5:21 pm Reason: Let's mantain civility in our discussins