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COVID19 / Best Assessment as to "Secondary" Impacts on UA/M+ in 2020 from Black Swans

COVID19 / Best Assessment as to "Secondary" Impacts on UA/M+ in 2020 from Black Swans

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Old Feb 1, 20, 9:31 pm
  #1  
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Question COVID19 / Best Assessment as to "Secondary" Impacts on UA/M+ in 2020 from Black Swans

Quick heads up before getting started: for issues arising for specific travel waivers on UA please see → → https://www.flyertalk.com/forum/unit...ch-2020-a.html ; for a more general discussion of the Corona Virus please see → → https://www.flyertalk.com/forum/chin...ona-virus.html (also note there's a wiki in this thread linking to other relevant threads too).

That out of the way here's my question: from a UA customer perspective, what is the tangible fallout to be expected beyond flight cancelations from the current big picture issues UA is facing?

For example, if UA effectively suspends its China services for a quarter would one expect to see more widebodies deployed on domestic turns - especially if doing so helps mitigate the lost capacity from the ongoing 737MAX groundings and delayed deliveries?

FWIW here's my take, much of it stemming from a central philosophy I have: the person who holds power in a relationship is the person who holds the power to walk away.

1. If demand falls, UA will have to increase its attractiveness. Whether that's cheaper fares, more miles, better upgrades, I do not know. But this strikes me as being different than management's stance during 2017/18/19 where you saw UA adopting a less customer-friendly stance (rising thresholds for PQDs/PQPs), dynamic award pricing, pushback against Chase, etc. Big picture take away: if UA all of sudden finds it needing customers MORE than customers needing UA, the power dynamic shifts in favor of the customer meaning UA's going to have to offer more, not less.

2. If businesses curtail travel to Asia (or just in general) and/or if road warriors are hesitant to travel, the now-determined-by-revenue-premier population will plummet.Not only are less road-warriors traveling, but those who still are may be doing so on cheaper fares due to less demand - see the prior point. The take away here for me is by directly linking Premier Qualification to spend - and more spend for 2020 when compared to 2019 - UA will have raised the bar for requaling whilst the bottom falls out due to demand and pricing falling.

3. UA's gotta do something with those widebodies. My kneejerk reaction is they'll be assigned to routes who can use the extra lift (e.g. central Asia, Europe, t-cons, etc.) and then you'll see a trickle-down effect across the network. One silver lining from this is - assuming domestic demand stays strong - the lost planned capacity from the MAX groundings and delayed deliveries is no longer (as large?) an issue.

4. Dynamic award pricing will be interesting to watch. Very curious to see how M+ handles award pricing now across the M+ ecosystem: 5k domestic awards, "specials" awards based on destinations, PN/PZ availability, STWL pricing, and so on. Point is UA built in all these things to leverage what they forecasted to be increasing demand to extract more miles/points/PQPs from us. However, if the bottom falls out on demand for a sustained period of time (i.e. 1 or more quarters) then the tables turn in our favor.

5. Over the past five years UA's encouraged once-loyal customers to become free agents...and free agents those customers became. The most telling example I see of this is UA (trying...snicker) to push back against Chase's CSR and raising PQPs-née-PQDs in 2019 when DL and AA did not. Any inertia felt by once loyal customers UA could capitalize on was squandered expended in a short-sighted killing of the golden goose. Now if demand comes roaring back, UA will have bet right but if it remains depressed, UA will have to work all the harder to woo back the customers they pushed into free-agency...ties into point number 1 about UA needing to increase their attractiveness.

6. BOHICA. Self-explanatory. I hope they don't cut too deeply into the PL lounges.

7. Doubt Premier Qualification Requirements will increase for 2021 - they may even drop. Self-explanatory. Ties back into points 1, 2, and 5.

...there are undoubtedly others too but if I had to distill what I currently see down to a one-liner it would be: decreased demand coupled with excess capacity will lead to more distressed inventory (read: upgrades and awards) and probably year-end "challenges" to help round up the premier / GS numbers.

Curious to see what others think.

Last edited by J.Edward; Feb 1, 20 at 9:38 pm
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Old Feb 1, 20, 9:45 pm
  #2  
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As for point 7, I doubt UA will reduce qualification requirement. If anything, I think we’ll see UA actually keep them the same for two years in a row
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Old Feb 1, 20, 9:45 pm
  #3  
 
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Flooding a market with hundreds of seats at a time when the demand doesn't increase can make a profitable market unprofitable. As supply overtakes demand, yield drops. Sure one can sell at rock bottom prices, but often a smaller plane with a good/supply/demand match will be far more profitable than a bigger plane with lower CASM, but far lower RASM. Especially when you remove the "feed" routes like...China from the demand. I'd be willing to guess that these are just some of the variables they are looking at. (For a real world example, UA has deferred its a350 time and again, yet taken deliveries on 787s, likely due in part, to the fact that "thin" demand markets would sink if flooded with sets, and some of the ME3 have found that using an A380 in a premium heavy config, lowers their premium cabin yield significantly.)
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Old Feb 1, 20, 9:48 pm
  #4  
 
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Originally Posted by J.Edward View Post
Quick heads up before getting started: for issues arising for specific travel waivers on UA please see → → https://www.flyertalk.com/forum/unit...ch-2020-a.html ; for a more general discussion of the Corona Virus please see → → https://www.flyertalk.com/forum/chin...ona-virus.html (also note there's a wiki in this thread linking to other relevant threads too).

That out of the way here's my question: from a UA customer perspective, what is the tangible fallout to be expected beyond flight cancelations from the current big picture issues UA is facing?

For example, if UA effectively suspends its China services for a quarter would one expect to see more widebodies deployed on domestic turns - especially if doing so helps mitigate the lost capacity from the ongoing 737MAX groundings and delayed deliveries?

FWIW here's my take, much of it stemming from a central philosophy I have: the person who holds power in a relationship is the person who holds the power to walk away.

1. If demand falls, UA will have to increase its attractiveness. Whether that's cheaper fares, more miles, better upgrades, I do not know. But this strikes me as being different than management's stance during 2017/18/19 where you saw UA adopting a less customer-friendly stance (rising thresholds for PQDs/PQPs), dynamic award pricing, pushback against Chase, etc. Big picture take away: if UA all of sudden finds it needing customers MORE than customers needing UA, the power dynamic shifts in favor of the customer meaning UA's going to have to offer more, not less.

2. If businesses curtail travel to Asia (or just in general) and/or if road warriors are hesitant to travel, the now-determined-by-revenue-premier population will plummet.Not only are less road-warriors traveling, but those who still are may be doing so on cheaper fares due to less demand - see the prior point. The take away here for me is by directly linking Premier Qualification to spend - and more spend for 2020 when compared to 2019 - UA will have raised the bar for requaling whilst the bottom falls out due to demand and pricing falling.

3. UA's gotta do something with those widebodies. My kneejerk reaction is they'll be assigned to routes who can use the extra lift (e.g. central Asia, Europe, t-cons, etc.) and then you'll see a trickle-down effect across the network. One silver lining from this is - assuming domestic demand stays strong - the lost planned capacity from the MAX groundings and delayed deliveries is no longer (as large?) an issue.

4. Dynamic award pricing will be interesting to watch. Very curious to see how M+ handles award pricing now across the M+ ecosystem: 5k domestic awards, "specials" awards based on destinations, PN/PZ availability, STWL pricing, and so on. Point is UA built in all these things to leverage what they forecasted to be increasing demand to extract more miles/points/PQPs from us. However, if the bottom falls out on demand for a sustained period of time (i.e. 1 or more quarters) then the tables turn in our favor.

5. Over the past five years UA's encouraged once-loyal customers to become free agents...and free agents those customers became. The most telling example I see of this is UA (trying...snicker) to push back against Chase's CSR and raising PQPs-née-PQDs in 2019 when DL and AA did not. Any inertia felt by once loyal customers UA could capitalize on was squandered expended in a short-sighted killing of the golden goose. Now if demand comes roaring back, UA will have bet right but if it remains depressed, UA will have to work all the harder to woo back the customers they pushed into free-agency...ties into point number 1 about UA needing to increase their attractiveness.

6. BOHICA. Self-explanatory. I hope they don't cut too deeply into the PL lounges.

7. Doubt Premier Qualification Requirements will increase for 2021 - they may even drop. Self-explanatory. Ties back into points 1, 2, and 5.

...there are undoubtedly others too but if I had to distill what I currently see down to a one-liner it would be: decreased demand coupled with excess capacity will lead to more distressed inventory (read: upgrades and awards) and probably year-end "challenges" to help round up the premier / GS numbers.

Curious to see what others think.
I expect a "double PQD qualification promo" to start in about March-April. I really don't think there is much else they can do given the time tag needed to fix the major product issues. The only other thing I would see is some kind of mileage redemption promo as "More discount seats for elites" or perhaps some type of a redemption discount if you fly x miles (or x PDQ).

United has really stuck themselves out on a limb, and a combo of Delta and Coronavirus has just sawed off the limb. That said, my bet is they are too arrogant to realize how bad of a situation they have put themselves in. Actions will only be taken after a disastrous 1st Q, and perhaps not until after a bad second quarter.
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Old Feb 1, 20, 10:28 pm
  #5  
 
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I have several GS friends who told me that their firms have not only suspended all travel to China, but also most of the Asia as well. Indefinitely.

For them, travel to other places like Europe won’t make up for GS qualification in 2020. It will be interesting to see how UA handles current GS with $30K spend by the end of year due to drastic reduction of TPAC travel.

Two months of suspension of China operation (only SFO HKG) remains) represents huge loss of revenue for UA. Nobody knows how this virus will eventually evolve.

I fear that the worst has yet to come, for UA. At some point the management needs to realize the importance of long term customer loyalty.
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Old Feb 1, 20, 10:34 pm
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Originally Posted by spin88 View Post
United has really stuck themselves out on a limb, and a combo of Delta and Coronavirus has just sawed off the limb.
Care to expand on the Delta portion? Delta and United each has its strength and weaknesses.

The virus is not UA's doing, of course, but with UA having had a significant presence in the China, no doubt there would be some setback. Delta, on the other hand, has already cancelled all flights to/from China until May.

Let's not pretend the virus is affecting only UA. Its rivals are experiencing setbacks as well, to varying degrees.
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Old Feb 1, 20, 11:52 pm
  #7  
 
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Originally Posted by kb1992 View Post
I fear that the worst has yet to come, for UA. At some point the management needs to realize the importance of long term customer loyalty.
The only way that this management team is going to change their thinking is if they are fired. If 8 years of under-performance has not done the trick, any fall in bookings is going to be blamed on "china" not on any of the other dis-amenities, of which the new harder qualification and less rewarding variable pricing are just two.

Originally Posted by Repooc17 View Post
Care to expand on the Delta portion? Delta and United each has its strength and weaknesses.
United has focused on corporate accounts (at deep discounts) and it's Asia/China markets and "long thing routes." Delta has focused on having higher quality product and service, including in it's domestic network. Delta's reputation is also much better. It has new A220s and A321s. United has, well, some new ultra-slim-line bathrooms on it's narrow uncomfortable 737s with no in-seat IFE.

Delta is going to keep picking up domestic travelers who have options, they are not going to go to United,which has the worst domestic service options of any network carrier, and I think the recent changes to MP (which has been an area where United was much better than DL) are also going to cost it business United in turn is going to get slammed with China/Asia being impacted, must more than will Delta.

Delta has by and large maintained the loyalty of it's elites, and has been attracting new travelers (which is why it keeps outperforming on PRASM), United will get to face the headwinds from Asia without what it once had - a very large and very loyal elite base.
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Old Feb 2, 20, 2:12 am
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Complete suspension of service to China and significantly reduced demand to the rest of Asia is today's reality, feeing up a large amount of capacity at zero notice. It's not enough time to schedule maintenance, repainting or even to rotate in larger planes on other routes (and it's a quiet time of year anyway). But China will either spring back quickly and, with it, the need to travel there, or the world as a whole has bigger problems. The global supply chain relies on China for so much product - it the supply chain re-opens, global companies need to nurture it so much of the travel is not optional. If it's safe to go, people will go: if it's not safe to go, the supply chain starts faltering (it's closed now, and shortages will hit sporadically in the next few months).

So, in reality, there's little UA can do in the short term but, in the medium term, there's little more than tinkering that will be required, or we have a global crash, which will have much more dire consequences all round.
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Old Feb 2, 20, 3:04 am
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Originally Posted by spin88 View Post
I expect a "double PQD qualification promo" to start in about March-April. I really don't think there is much else they can do given the time tag needed to fix the major product issues. The only other thing I would see is some kind of mileage redemption promo as "More discount seats for elites" or perhaps some type of a redemption discount if you fly x miles (or x PDQ).
A very attractive "MilePlay" is going to show up in the next few weeks. It will be a lot of miles to gain from it after flying many legs.

I dont think they will tinker with the qualification targets. Just give out more as freebies to the big corporate accounts and existing high spending elites.
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Old Feb 2, 20, 4:35 am
  #10  
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Originally Posted by J.Edward View Post
3. UA's gotta do something with those widebodies. My kneejerk reaction is they'll be assigned to routes who can use the extra lift (e.g. central Asia, Europe, t-cons, etc.) and then you'll see a trickle-down effect across the network. One silver lining from this is - assuming domestic demand stays strong - the lost planned capacity from the MAX groundings and delayed deliveries is no longer (as large?) an issue.
I assume that by "gotta do something" with those widebodies, you mean "gotta fly them somehwere." I disagree. UA could very reasonably conclude that parking (most of) them makes more financial sense than flooding the domestic / transatlantic markets with excess (unprofitable) capacity, especially during the slowest time of the year.
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Old Feb 2, 20, 4:39 am
  #11  
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Originally Posted by kb1992 View Post
I have several GS friends who told me that their firms have not only suspended all travel to China, but also most of the Asia as well. Indefinitely.

For them, travel to other places like Europe won’t make up for GS qualification in 2020. It will be interesting to see how UA handles current GS with $30K spend by the end of year due to drastic reduction of TPAC travel.

Two months of suspension of China operation (only SFO HKG) remains) represents huge loss of revenue for UA. Nobody knows how this virus will eventually evolve.

I fear that the worst has yet to come, for UA. At some point the management needs to realize the importance of long term customer loyalty.
Even if the suspension is lifted 1 April, while business travel might rebound, tourism will take time to rebuild. I foresee a lot of hobo business class availability once travel to China is restored.
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Old Feb 2, 20, 6:21 am
  #12  
 
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Originally Posted by Bear96 View Post
I assume that by "gotta do something" with those widebodies, you mean "gotta fly them somehwere." I disagree. UA could very reasonably conclude that parking (most of) them makes more financial sense than flooding the domestic / transatlantic markets with excess (unprofitable) capacity, especially during the slowest time of the year.

If they park all those widebodies what happens to the pilots/FA's that were flying them?
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Old Feb 2, 20, 7:13 am
  #13  
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Originally Posted by Winkdaddy View Post
If they park all those widebodies what happens to the pilots/FA's that were flying them?
Suspend or slow down hiring and let attrition do some of the work. Voluntary furloughs / leaves of absence. In fact the latter is already happening, according to the Feb. 1 Association of Flight Attendants weekly update:

March 2020 – One- and Three-month COLAs

Late into this evening, we continue to advocate for management to be prepared to award additional one- and three-month COLAs for the month of March. As our Members learn about the impact of the changes to the March schedules resulting from the suspension of service into China, we are encouraging management to allow those who would like to have time away from work the ability to be awarded time away.

Flight attendants interested in a 1-month or 3-month Special COLA starting with the March schedule month may submit their request through CCS.The bid period for these leaves closes at 08:00 CST on February 6th.

United will continue to monitor the development. While United’s current plan is to resume flying to China from each hub on March 28, the situation is fluid and continues to develop. As additional information becomes available, we will share that with you. In the meantime, United will have opportunities to provide time away from work. If you are able to do so, you may want to review the COLA packet on the company’s website.
If that isn't sufficient then they'll do involuntary LoAs in reverse seniority order. It's not like UA (and other airlines) haven't been through something like this before.

Maybe they will keep all of those planes flying. I would love for my upcoming TPA-SFO trip in F which is currently scheduled to be on an A320 to be replaced with a lie-flat 777 or at least be upgauged to a 757 as some current 757 flights are upgauged to 777s. But I think in most cases UA will conclude it will lose less by idling crews and equipment rather than paying them to fly around either empty or at the rock-bottom fares they will have to offer to fill them up.
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Old Feb 2, 20, 8:04 am
  #14  
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Originally Posted by spin88 View Post
United has focused on corporate accounts (at deep discounts) and it's Asia/China markets and "long thing routes." Delta has focused on having higher quality product and service, including in it's domestic network.
You can see this in the different cancel/waiver policies. UA's extends only through March, while DL's through April. DL can afford to be more generous because it is much less reliant on Asia travel, and takes much less of a hit with an extra month of cancels.
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Old Feb 2, 20, 8:49 am
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Does anyone have a sense of type and qty of aircraft idled?
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