Topic of the Week: United and Denver

DEN - Denver, United

This week, United signed a deal with the City of Denver to reduce costs in exchange for extending a commitment to 2035. Is this a good deal for United? What about for Denver?

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17 comments on “Topic of the Week: United and Denver

  1. With Frontier shifting away (but Southwest growing) I can see how DIA is a bit needy. That being said, the whole penalty thing is pretty odd. UA is a $37 billion / year company. Do they really care about a $20 million / year penalty? Seems they can shift volume as they see fit.

    1. Jim and also Eric, “DIA” was the old Denver Stapleton airport. “DEN” is the current Denver International airport. If United (or anyone else) committed to flying into “DIA”…. now THAT would be BIG news!! :)

      1. Actually, Keith, DEN has always been the code for Denver. When Stapleton closed, the codes simply were moved to the new airport. DIA is the colloquial shorthand for the full name, Denver International Airport, and is used by most everyone that lives near and uses the airport. :)

        1. Even the signage at baggage claim in DEN advising people to be sure to get the right bags because if they don’t they’ll have to come back says “DIA” when referring to the airport.

  2. I have flown into, out, or through DIA too many times to count and have only flown United when the government was paying for it. I’m surprised to find they still exist there. Only slightly joking, but it shows for the leisure traveler that Frontier and WN do well for our needs.

  3. Denver makes money as it is the ATL of the Mountain West. Large, in a fairly isolated area more dependent on air service. WN serves only the main nationwide cities (albeit a lot of them) and F9 only adds a few more destinations (e.g. CID).

    Like any network carrier, UA will win on it’s worldwide network of partners (DEN-FRA on LH doesn’t work without UA connections), its lounges, loyalty program, and overall network strength domestically even to the smallest destinations.

    In fact looking at much of the mountain-midwest I’m pleasantly surprised how much air service is mainline or large RJ given a city’s population. Look at Cedar Rapids, Sioux Falls, lots of stuff Montana-MSP on DL. In the east that traffic would leak to a major airport since the east is more driveable and dense.

    Have a great weekend everyone!

  4. As a DEN based flier it’s great news. The presence of three carriers hubbed here (whatever WN.. it’s a hub) means that fares are not experiencing the upward climb they are in other areas. Especially where all three carriers compete.

    LH’s 747 service from Frankfurt has some really nice load factors (for the airline.. for me as a passenger not so much). UA’s 787 service to Narita is going well too. But Denver is at a slight disadvantage when viewed against most of UA’s other hubs. We don’t have the population, we don’t have the same number of fortune 500 companies (though that gap is narrowing), and most people view the area as a seasonal destination for skiing.

    Overall I think it’s a great move for Denver. My concern would be that WN or F9 would suddenly want to cut a discount deal as well and cause the airport to run more in the red than it is already. The new hotel and rail link have move DIA into the category of airports that Cranky would groan at.. using money from the runway maintenance and expansion budget for a new hotel and rail link… what were they thinking?!

  5. What I’ve always been told is that a hub operation needs O/D traffic. I’m sure it has something to do with it but I don’t totally agree. DEN has more O/D traffic than ATL but I don’t think anyone is going to argue that the two are in the same category regarding hub operations. Likewise MCO has a ton of O/D traffic but nobody is building a hub operation around Disney World.

    DEN seems like a hub in the likeness of the former MCI hub. Geographically it’s a good location to send spokes off to all corners of the country, but in reality the population just isn’t close enough to DEN. Case in point…Back when you could get really cheap fares on Priceline or Hotwire I ended up with a lot of layovers at DEN flying all points west. Today those discount fares with a layover in the front range are gone, at least on the flights I’m taking. Much cheaper (and faster) for me to fly direct to SEA or SFO or LAX, whatever.

    Denver is a decent sized city with a significant leisure traffic so UA should keep a decent operation there but a full scale hub? I’m skeptical. It’s no ORD for sure. The exact same thing can be said of SLC and Delta, probably moreso for them, so……

  6. Well, Mr. Cranky, while you were recently debating the merits of the UA hub at IAD, I suggested that DEN was the vulnerable hub. It seems that the DIA folks had the same vibe………As a previous poster indicated, this favoritism of UA will not go unnoticed by F9 and WN.

  7. Good for UA? Good for DEN? I would love to have a little “Airports 101,” here.

    For what is UA paying DEN, an entity run by the city and county of Denver? DIA’s press kit shows that it gets revenues from:

    –facility rentals, presumeably, in part from UA for the check-in area, gates, ramps, baggage claim area, what else?
    –concessions, presumeably, UA doesn’t pay any of this,
    –parking, presumeably, UA isn’t paying any of this,
    –landing fees, I assume UA and other airlines are paying most, if not all of this,
    –aviation fuel tax, not sure if UA is paying any of this, directly,
    –others, like it has 76 oil and gas wells on airport property, with $5.5 royalties received in 2013.

    Ok, so how much is UA paying for each check-in counter, each gate, each ramp, each baggage claim? Is UA paying anything on its own, something DEN doesn’t even know about? Not sure, who is paying for all the utilities.

    How much is UA paying for each landing and take-off, by aircraft type? If it’s a contracted-out regional, who’s paying this? UA, or the actual operating carrier?

    The press kit says it cost DIA $11.45 per passenger enplanement, in 2013, I believe that is. Is UA paying a per passenger enplanement fee to DIA?

    How about the PFC collections? Who’s getting that? Even though UA collects it through a ticket sale, does UA get to keep any of that? Anything for the admin. costs, like handling and processing? Does DIA even know how much UA is collecting?

    There! What was your question again?

    1. What would happen if UA pulled a Cleveland on DEN?
      The passenger traffic would drop (by how much is the question) and DEN would have less revenue and alot of empty space. All of those concession and fuel vendors would see less revenue. It is a trickle-down effect.
      If DEN wants to keep the revenues (and jobs) then it is in the airports best interest to keep UA and all of the connecting traffic that UA provides.
      That is why UA is important to DEN.

  8. DEN (and SLC for Delta) serves a very important need connecting flyers from/to smaller airports in the West. Many airports only have service to some combination of SEA, PDX, SFO, LAX, SLC, DEN. DEN and SLC are the only connecting points to get between east and west with only one connection. Now, the city of Denver doesn’t care about that, but the DEN and SLC hubs are very important to passengers.

  9. If I read the article right, UA will reduce its costs in the short run, while committing to remain longer. If management is short-term oriented it means that improves financial results in the short run while potentially imposing costs in the out years. On the other hand, DEN is a decent location for a hub, and benefiting from the Bakken oil business.

    It is a vote of confidence that UA doesn’t have any near-term plans to take down this hub

  10. I think Cranky did an analysis once that showed why DEN is so important systematically to United (I vaguely remember it being part of a post about an airline centered around New Orleans).

    Anyway, Denver is United’s gateway for most of the northwest. With LAX being…well LAX and SFO tied up, DEN sits pretty nicely. I couldn’t see United pulling out as easily as I did with DEN. Plus, it looks like DEN got some decent protections for itself to at least find some way to fill the void.

    Personally, I could see United reducing in IAD or LAX before DEN, but stranger things have happened.

  11. United more or less owns LAX/SNA/ONT/BUR-DEN and to various lesser extents, SFO-DEN and SEA-DEN. And they have a lot of mainline traffic to big eastern cities. UA carries a lot of traffic through Denver. At a minimum the deal won’t hurt UA.

    1. Those CR2’s they are running a couple of times a day BUR-DEN and ONT-DEN isn’t really owning that aspect of the market.

      I know many frequent fliers out of DEN who will not stop foot on UA even though they are million milers. Sure the deal won’t hurt United, but they have a long way to go to get back to where they were in DEN 10 years ago and will probably never get there again.

  12. I Would much rather see Delta, Frontier or American get long term leases at D.I.A. than United. My fear is management at United seems so out of whack lately I could totally see united reducing flights at DEN in a few years and then Denver has a big mess on there hands trying to fill gates, ect. I Say Just do the leases a few years at a time. I hope Frontier, Delta & American ask and receive just as long of a lease as United got.

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