In case you missed it, United posted great financial results for the second quarter of this year. While I find it hard to proclaim that the management team has “clearly turned this carrier around,” as CEO Jeff Smisek said at the GBTA convention last week, it is most certainly a hopeful sign that things are getting better.
What was more interesting than the result itself was the discussion on the earnings call about the network and scheduling changes United is making. These are mostly good moves that copy what we’ve seen both Delta and American do. I just wish these had happened sooner. Best of all here? A lot of those pesky 50-seaters are finally going away.
Ditching the 50-Seaters
It seems like United flies more 50 seat jets on longer distances than anyone else and it’s particularly frustrating for travelers. It’s also not very efficient. A previous agreement with pilots indicated United was going to follow Delta’s lead and start paring down 50-seaters but it just wasn’t happening very fast.
This isn’t going to happen overnight, but we now know that by the end of next year, United will retire more than 130 of those airplanes. Actually, the airline will retire “the equivalent” of more than 130, so I don’t know what that means. But it’s a lot. Seventy of those will be replaced with Embraer 175s, and that’s a big improvement. The rest won’t be replaced. That means fewer flights on bigger airplanes.
Re-banking the Hubs
Just as American announced recently, United will be re-banking its hubs in Chicago, Denver, and Houston. (Denver and Houston were previously announced, actually.) Over the years, many airlines created rolling hubs as a way to cut costs. Instead of having airplanes all come in at once, move passengers around, and then depart again, the airlines tried to spread demand out throughout the day. That allowed an airline to have fewer gates with fewer employees and still service the same number of airplanes but it does mean longer connection times in many cases.
It all sounds well and good until you realize you take a revenue hit from it. Having shorter connections means your results show up higher in the reservation system display. And the higher up you display, the better those flights are likely to do. Sure, costs are higher but the revenue benefit is worth it. And shorter connections end up being better for travelers… for the most part.
I do have to wonder about reducing connection times in a place like Chicago. Both American and United are re-banking there, so you’re going to see more peaks with congestion. The airport’s new runway configuration means it has a lot more capacity but when the weather gets bad, well, you know how it goes. If United can get its operational act together, then people might like this. But I imagine that there will be a lot of concern in the near term since often United schedules connections that are too short already in a place like Chicago.
More Seasonal Scheduling
This is yet another move that is similar to what the new American team is implementing based on US Airways’ success with it over the years. United will add more flying during times of peak demand and cut flights when demand is lower. Want to hear an interesting stat? In 2012, United scheduled 13 percent more capacity in July versus February. Next year, July will have 25 percent more capacity.
United can do this by better scheduling maintenance and crew training during the softer times. Pull more people and airplanes off the line then and you don’t have to do it as much during the peak. Travelers get more capacity when they really want to fly, though it does mean that airplanes will be more full.
Simplifying the Regional Operation
Today, United has 11 regional partners (Cape Air, Chautauqua, CommutAir, ExpressJet, GoJet, Mesa, Republic, Shuttle America, Silver, SkyWest, and Trans States). While one of these will disappear on its own (when Chautauqua merges into Shuttle America), it’s still a lot of relationships to manage. To make it even more difficult, the operations aren’t really designed very well.
When Comair went on strike many years ago, it was the only Delta Connection operator in Cincinnati. The strike paralyzed Delta there, and airlines quickly learned to diversify their regionals. But United took this to an extreme. At Dulles alone, United has 8 of its regionals flying under the Express brand. By September, that will be chopped in half to only 4. Better plan.
Speaking of Dulles, this is a bit of a tangent, but someone asked about United’s thoughts on Dulles during the earnings call. Jim Compton, Vice Chairman and Chief Revenue Officer, gave a long-winded non-answer that ended with “we are very much focused on revenue initiatives that we’ve implemented, that we’re going to implement, and those that we’re researching, and that includes the overall look at the network.”
Sounds to me like there’s more to come.
