United To Shrink by 10 Percent

I have to say that I’m completely shocked. It looks like United CEO Glenn Tilton, now without any merger options left, has actually decided to run an airline. There are some extremely painful cuts in here, and it’s tough to see as someone who used to work for the airline and still has friends there. But, I have to say, it seems like the right thing to do. This seems to go deeper than American’s previous round of cuts, and I wouldn’t be surprised to see more follow from around the industry. (US Airways?)

So what exactly is happening? Well, to sum it up, domestic mainline flying bears the brunt of the pain. It will be down a mind-numbing 17 to 18% (in terms of available seat miles) by the end of 2009. This will come from the combination of all 94 737s being retired (the 30 737-500s were already planned) and the death of Ted, which will see First Class seats return, and therefore, fewer seats onboard. International will take a hit as 6 747s head to the desert. Express, however, will be up. So in the end, we get domestic capacity down 12.5% to 13.5% and systemwide capacity down 9 to 10%. The airline says that most of the cuts will be in the form of reduced frequencies and smaller planes, but there will also be some market exits (as we’ve already seen with Anchorage).

So, we know the basics here. Fuel goes up, fares need to go up. How do you do that? Pull capacity out. United is doing the right thing, but of course, it will mean higher fares for you. Let’s focus on what’s good for the customer here.

Those ratty old 737s will be grounded

If you’ve been on a United 737, you know they are in rough shape on the inside. Those things have needed to be refurbished for years. They still have the old oven-less Shuttle by United configuration on some of them, so First Class service wasn’t consistent at all. By the end of 2009, they’ll all be gone, and you’ll be on much more comfortable Airbuses as well as 70 seat regionals which are all nicer than the 737s they fly today.

You’re less likely to be on the 747, the worst plane in United’s fleet

With 6 747s disappearing, that means when you fly internationally you have less of a chance of getting stuck on one of the most uncomfortable planes in the sky. Those 747s are relics from a previous age. There are not even personal screens onboard, so forget about audio/video on-demand. And the upcoming reconfiguration with the new Business Class will add a much greater percentage of Economy Minus seats than on the other aircraft types. The fewer the better.

Floridians and desert rats can fly First Class once again

Oh Ted, I can’t even begin to express how happy I am to see you go. 08_06_04 tedsdeadAnd actually, I’ll be devoting a separate post to Ted’s demise, but let’s just say that I’ve waited for this day for a long time. This change will mean that United will offer more consistent service throughout its fleet (well, its fleet of aircraft with 70 seats and higher). Europeans flying in a premium cabin through Dulles to Vegas can now get a premium cabin the whole way through. People living in Phoenix and Florida will again be able to fly long distances in First if they so desire. The downside here? Right now, with 156 seats, Ted has four flight attendants dedicated to coach. That will clearly change after the reconfiguration.

I have to say it again. These changes are encouraging. It’s better for the customer, even if it does mean higher fares. I only wish it didn’t mean so many job losses. What do you guys think?


33 Responses to United To Shrink by 10 Percent

  1. David M says:

    “70 seat regionals which are all nicer than the 737s they fly today.”

    If that means Embraer 170s, yeah I can see that. I’ll take a ratty old 737 over a CRJ any day.

  2. A says:

    Cranky, I agree with you about the airlines needing to cut capacity, but it seems you always seem to steer your comments to a first class audience. With TED gone some people will get that option now, but is United going to make more money off those seats? Yes, they are nice but I’ve yet to meet anyone that actually has bought a 1st class ticket…unless it’s last minute and the only remaining seat. I’m a frequent business traveler and do on occasion enjoy the 1st class comforts when my status allows, but my employer isn’t coughing up for that upgrade. The airline is giving it away because I travel frequently. Stupid IMO, since I have to travel regardless if an airline is throwing in something or not. I imagine airlines would make much more $$$ by dumping their awards programs and go back to charging for the premium service. Or at least offer the front cabin to anyone who wishes to pay up some extra $$$ at the gate. So long as they are doing the frequent flyer programs I’ll gladly take advantage, but in these times I think it’s time for those to die right along with the outdated aircraft and excess capacity.

  3. Yo says:

    Wow Ted is dead, just like everyone who had a blood pressure said it would be. Just like Song, Continental Lite, Shuttle by United, MetroJet..etc.

    How in the hell do airlines keep hiring the management to keep making the same completely stupid decisions? Its not rocket science, the “airline within an airline” idea has never ever ever ever worked.

    I expect in a few years, when this mess is settled, some airline will hire a bunch of MBA’s from a biscuit company and we will go through this whole thing all over again.

    Re: 737 or RJ, the 737 wins 100% of the time. I like my knees a lot, I just don’t like having them near my face when I fly.

  4. Mach .95 says:

    Agreed on all points. The volume of mystery crumbs in the 7-threes has to equal at least two rev pax. Ted was cool for about…oh a minute or two, but quickly distinguished itself as a low service carrier with all the pain of a mainline. It will be interesting to hear from the UA insiders on where these salary and mgmt cuts are coming from since no one I know has a clue if they are or are not on the list. If it took US Airways denial to accelerate the process, perhaps they should get rebuffed a few more times. This was a fantastic stock trigger for block buying this morning. Hopefully some more hard decisions will be made and lean this pig a bit more.

  5. Greg says:

    Speaking strictly as a pax (I’ve never worked in the industry), I think these reductions are needed for survival of the airline. My concern would be domestic feeder traffic to international flights. Since I don’t live in a UA hub city, decent connection times are important. I’m sure the route planners will be busy burning the midnight oil ensuring this is impacted as little as possible.

    As for equipment, I have to agree that the coach cabin in UA’s 747’s have much to be desired. Two years ago I flew LAX-NRT and UA had 747 equipment on that route. Last week I flew it again, but on a triple 7. Much nicer (wife and I love the 2-5-2 configuration, even nicer in Economy +). On the return we accepted the upsell at check-in and found C class to be worth the cost. The 777’s are the way forward. How much service life is left in those 747’s anyway? Most must be 20 something years old.

  6. CF says:

    David M – Ok, fair point. I ride the 170 for the first time in the fall, but I’ve been onboard one on the ground and it looks really nice. The CR7, well, yeah, that’s not the same kind of product.

    A – You bring up some good points, and I think it’s worthy of a much longer post than I’m going to leave here in the comments section. The general value proposition these guys throw out there is that it’s good to be elite. You get upgrades, you get economy plus, you don’t pay fees, etc. I personally think those are very valuable benefits, but UA doesn’t reward the right behavior. Someone could fly a lot of miles on super cheap tickets and still get those benefits, even though that person may be highly unprofitable. I think frequent flier programs are valuable, but they aren’t rewarding the right behavior.

    Yo – The list of dead airlines within an airline is long. Song, Metrojet, Shuttle by United, CALite . . . . McKinsey seems to be responsible for some of these failed options, though ultimately it’s management’s fault for believing that it’s a good idea. The one that continues to baffle me is Jetstar in Australia. That seems to do much better than any other.

    Greg – It will be very interesting to see where these cuts actually happen. I would think it would be geared toward ensuring good international connectivity, but domestic frequency will certainly suffer. It will be particularly interesting to see what this means for Denver, since there’s so much going on there with Southwest and Frontier.

    Those 747s are only about 12 years old on average. There were about a dozen that are pre-1995 with the rest being delivered between 1995 and 2000.

  7. JN says:

    Are you smoking crack??? What do you mean by “…you’ll be on much more comfortable Airbuses as well as 70 seat regionals which are all nicer than the 737s they fly today.”? I don’t doubt that the Airbuses are comfortable (because they are, but all those noises in the floor prior to take off give me the creeps). As a 6’2″, 200lb man, I’ll take a Boeing 737 anyday over the knee crunching regionals.

    Has anyone come up with a new slogan to replace: “If its not a Boeing, I’m not going”?

  8. Allen says:

    What boggles my mind is that UAL took all this time to kill off Ted. They’ve been struggling for years. Why didn’t they kill Ted off 3 years ago and focus on their core business?

  9. DRG says:

    “Wow Ted is dead, just like everyone who had a blood pressure said it would be. Just like Song, Continental Lite, Shuttle by United, MetroJet..etc.”

    …and Australia’s Jetstar. Oh wait! That’s actually been successful. The idea of running an airline within an airline is not necessarily without its merits. It’s all about how it is set-up and the application of the model. Maybe it just doesn’t make sense in the U.S.

    “As a 6?2?, 200lb man, I’ll take a Boeing 737 anyday over the knee crunching regionals.”

    Air Canada Jazz has CRJ-705s, which are essentially CRJ-900s certified to carry 75 passengers in a two-class layout. They’ve got excellent leg room and I would argue are comparable in comfort to the Embraers. It always depends on how the plane is configured, but I would take either regional jet over the middle seat in a 737 or A320 any day.

  10. eponymous coward says:

    Its not rocket science, the “airline within an airline” idea has never ever ever ever worked.

    Horizon Air says “hi”.

    The difference is that Horizon IS an airline within an airline, not just some artificial “airline” that is basically branding and some minor changes. When Alaska took it over back in the 1980’s, they actually kept it separate- the flight crews aren’t the same, the inflight service is different, they have a separate executive team, and so on.

  11. Hunter says:

    Horizon Air says “hi”.

    The difference is that Horizon IS an airline within an airline, not just some artificial “airline” that is basically branding and some minor changes. When Alaska took it over back in the 1980’s, they actually kept it separate- the flight crews aren’t the same, the inflight service is different, they have a separate executive team, and so on.

    *****
    I would argue Horizon is less an airline within an airline and more a wholly owned regional subsidiary.

  12. A says:

    “…but all those noises in the floor prior to take off give me the creeps…”

    No doubt, what the heck is that? Grown so used to those noises on the NW A319/320 fleet that when I didn’t hear it on an Air Canada A319 I just about started screaming for my life before takeoff.

    Count me in the camp that will take a B737-800 over the A320 anyday. I’ve always found Airbuses to feel a little flimsy from a passenger perspective. Then again, if solid construction sold planes we’d still have the L1011.

  13. CF says:

    JN – Um, no, but it looks like I picked the wrong week to stop smoking crack.

    Allen – That’s a question for the ages, and likely one that won’t be answered.

    eponymous coward/Hunter – I agree with Hunter. Just as American Eagle was once an independent (or several) carrier, Horizon was its own beast before Alaska required them.

    A – I actually wrote on post on the Airbus PTU (that’s what makes the noise) a while back. Check it out.

  14. Bobber says:

    If this helps United survive, and improve its product, then it’s a good thing. Personally, I’ve been a loyal UA transatlantic flyer for 8 years, and the 747-400 flights do test my tolerance.

    On the subject of elite programs – I suspect I’d be accused of being one of those unprofitable elite customers, given that I’ve never booked F or C, but occasionally taken the upsell. However, loyalty is loyalty – if us Y passengers (S,T,W,X whatever) don’t fly United we pay someone else to fly us in that class. Last I checked, the C class-only airlines weren’t doing so well flying across the pond.

  15. David M says:

    A: The “barking” noise is the hydraulic power transfer unit. This thread gives some discussion of it, in particular reply 4: http://www.airliners.net/aviation-forums/tech_ops/read.main/93654/

    In the past I’ve quipped that I get worried when I’m on an Airbus narrowbody and it doesn’t make weird noises.

  16. David M says:

    Oops CF, didn’t see your response on the Airbus noises, had to step away in the middle of typing for a bit, came back and didn’t reload the page before finishing my post and sending. ^_^

  17. Yo says:

    I thought JetStar was an airline purchased by QF?

    As for the Airbii noises, yeah, they are freaky, I’ll take it over the really scary noises the 737 100 would make. And the whistling sound coming from the door that never sealed, bizzare engine sounds…

    You want noises? Fly the IL62M, that thing sounded like a sub that went too deep!

  18. Albert says:

    UA (and, dare I say, all US based carriers?) doesn’t reward the right behavior with its FF program because it isn’t focusing on the premium customers.

    To actually get loyal premium customers they’d need to re-do their entire premium offering and focus on the premium passengers, which should lead a stop in the dilution of the FF program, and thus rewarding the behavior that’d be profitable to them.

    Then again I’m just a pax, not a business guy.

    As for JetStar, it’s actually a decent airline though I’ve only flown short-hauls with them. It probably helps that the interior seems new and the crew attentive (or as attentive as AU-based crews can be). I’m not sure what all the other US-based ones were like but I’d have nothing against flying JQ over QF if it wasn’t for the fact that I can’t credit the miles to AA. Would be interested if someone else can do an in-depth analysis on this topic!

  19. Dan Webb says:

    Is it possible that the ex-Frontier E170s can find a new home with United Express?

  20. David says:

    Never made sense that UA started TED anyway since Shuttle by United didn’t work. I never understood how they could have the word ‘Shuttle’ in the name but some markets only had two flights a day. How is that a Shuttle?

  21. flightjunkie says:

    I’m going to jump out on a limb here and say that potentially Ted *wasn’t* (and so were some/many routes) as bad a business idea as one would think, it’s just that as fuel skyrocketed to such high levels, even profitable ventures become unprofitable.

  22. CF says:

    Yo – Nope, Jetstar was started up by Qantas, but they did buy Impulse which provided the 717s which were used to start Jetstar. So I can see how there might be some confusion with that. Oh, and you flew an IL-62? Now I’m jealous.

    Dan Webb – It’s always possible. There are some growth plans for Express, but I don’t know anything about what’s already in the plan and what might be changing. I’m sure Republic would be happy to place those somewhere.

  23. Daren S says:

    Given the criticism of the airline within an airline model, it will be interesting to see how BA’s Open Skies performs when it officially launches this month. I’ll be interested to see your post on that CF.

  24. Shane says:

    Great to hear about the parked 747’s. Now Family Airlines can get the birds they need to fly the high-yield routes vacated by Skybus. Think of how many times a day you can pack that 747 from Greensboro to Columbus!

  25. Greg says:

    Cranky
    Didn’t know those big birds were so youthful. I have to admit that the jumbos flown 2 years ago looked relatively new – perhaps it was the 80’s style overhead monitors that made it FEEL like they were from that decade. Thx for the info…

  26. flightjunkie says:

    Aircraft age has little to do with the actual customer experience of flying. It all has to do with how updated the interior fabrics, technology and upkeep is.

    I recently flew on both United’s 747 and 767 with the new first class suites, business class fully-flat beds and updated Economy cabins, and the plane truly felt like they were brand new.

  27. Yo says:

    CF, nothing like non-reving on a IL62, wasn’t supposed to be that plane, but they did a swap and I spent 9 hours on that beast on CSA Czech Airlines. The crew was embarassed so they began service while we were in a 40 minute JFK taxi.

    Then, with no warning, we took off. Pax in the aisles, bathrooms, beer cans and bottles rolling down the aisles, FA’s quickly trying to stow carts as we took off. Great fun!

  28. SteveFilson says:

    One common misunderstanding in the thread. United’s Shuttle was actually successful. What killed it was the new security procedures required for turning aircraft around post 9-11. United’s management couldn’t figure out how to comply with the new rules and do a 20 minute turnaround. It speaks volumes about Southwest whose management team did figure it out. Anyway, senior management in Chicago killed the Shuttle and later regretted it. That also speaks volumes about UAL management.

  29. Frank says:

    *****
    Has anyone come up with a new slogan to replace: “If its not a Boeing, I’m not going”?
    *****

    Fly Airbus with its die-by-wire technology

  30. Bobber says:

    Mmmm – some xenophobia creeping in here, perhaps?

    United’s Airbus fleet are far more comfortable than their scabby 737’s. The 777’s are great, and vastly better than airlines flying A300’s or the few A340’s I’ve flown on. Try an IL96 for funky noises on taxi, and midway between Tashkent and New Delhi, at 37000ft with no English translation from the cockpit, a rowdy drunk next to you and a sudden loss of altitude.

  31. Lawrence says:

    You’re right in saying that the 737s are in pretty bad shape. I usually end up flying one per trip (BOS-IAD usually). I typically try to get on an A319 or 320, or a 757 if possible. However, other than an EMB 170, I’d rather fly a 737 than a regional.

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