When United Airlines and Continental Airlines completed their merger in October 2010, the new carrier promised customers an enhanced travel experience, combining the best products and services from each. Some of the proposed benefits under the merger were said to include the world’s most comprehensive global route network; the most modern and fuel-efficient fleet (when adjusted for cabin size); and the best new aircraft order book among US network carriers.
According to the airline, the combined route network provided “world-class international gateways” to Asia, Europe, Latin America, Africa and the Middle East, with non-stop or one-stop service from virtually anywhere in the United States. If that wasn’t enough, it also promised an industry-leading frequent flyer programme that would provide more opportunities to earn and redeem miles worldwide; and optimal hub locations in 10 cities, including hubs in the four largest cities in the United States.
At the time the merger was completed, United had hubs at Chicago O’Hare, Cleveland Hopkins, Denver, Houston George Bush, Los Angeles, Newark Liberty, San Francisco, Washington Dulles and Guam’s Antonio B Won Pat airports. The merger created an airline with 371 airports (223 domestic and 148 international), serving 59 countries and 5,811 daily departures carrying 144 million passengers a year.
And United has continued to make moves to expand and strengthen its global network since the merger, most recently through the July 2014 addition of Air India to the Star Alliance. “India is one of those markets that is growing at a very fast pace, so it’s an important market for United,” says vice chairman and chief revenue officer, Jim Compton. “We already have non-stop service to Delhi and Mumbai out of New York.”
Looking more broadly, alliances are important for extending airlines’ networks, says Compton. “They’re important because you want to extend your network beyond just Delhi and Mumbai, and alliances that let you do that are terrific,” he enthuses. “As Air India comes into the Star Alliance, it will provide United with the chance to grow our trans-Atlantic service to India in order to connect beyond where we fly. Alliances are very valuable, no matter who is in Star.”
On the other side of the world in Latin America, United recently announced plans to expand in Central America with service to Santiago, Chile, Punta Cana, Dominican Republic, and Belize City, Belize. And Brian Znotins, United’s vice president of network planning, believes that the move is a key one as Central and South America is a growing market for the US ‘super carrier’.
“Latin America is pretty important to us,” admits Znotins. “One thing going back to the merger and building our route network was having well-balanced destinations for business travellers in the United States. Each entity is important because we wanted to offer broad destinations to travellers and add stability to our earnings.”
In the old airline business, carriers were tied to Pacific or Atlantic routes, says Znotins. “But now it’s more balanced. Latin America is a hot and high-growth market where United is now the number two carrier in [the region],” he notes. “We have great coverage in South America and have a great partnership with Copa, so we can grow an already great portfolio. A strong market to begin with is now improved.”
But like other carriers, United is cutting back service to Venezuela over the currency crisis. “We currently have one flight a day to Caracas from Houston. The aircraft will be downgraded from a B737-900 to a -700, and service will go down to four days a week in September,” says Znotins. “The oil business is still happening in Venezuela and Houston is the US oil capital, so travellers still need those flights.”
According to Znotins, United’s Asia route network has been enhanced by having the B787 Dreamliner in its fleet. The carrier recently started Dreamliner services between San Francisco and Chengdu, China, and earlier this year announced plans to introduce a B787-9 on a new non-stop route between Los Angeles and Melbourne.
“The Chengdu route simply wouldn’t work without a B787,” states Compton, who notes that the service marked the start of the second phase of United’s Pacific strategy. He says: “We’ve seen significant capacity growth between the US and China, and most of that capacity is in Beijing and Shanghai. We have great footprints to these cities. Now we can look at other areas in China that are new and growing, and Chengdu is one of those.”
Success in the airline business is matching capacity and demand, says Compton. “The B787 between San Francisco and Chengdu is unique because of its size. It’s the size of B767-400, but the B787 can fly routes done by the B777, but with less seats,” he stresses. “We’re excited to be the launch US customer for the B787. We’ve already taken 11 deliveries and have 65 orders.”
United has also started service between San Francisco and Taipei, Taiwan, reveals Compton. “We want to look for secondary cities in Asia,” he says. “We’re looking for more opportunities to do more flying in cities with larger populations, and we can do that with the B787.”
Znotins refuses to be drawn on any potential new routes in Asia or China other than to admit that the successful launch of services to Chengdu “opens more opportunities to other cities in China”. “China is definitely a growth market in the world, so we’re keeping a close eye on that region. We’re also excited about the success in Chengdu and Taipei,” he concedes.
In the past few years, the US and some foreign flag carriers have made the New York–London route a major battleground, and United is certainly staying in the game. “New York–London is an important market in our network. We do very well with our five non-stop trips out of Newark,” says Compton. “What we have been doing is focusing on things that are core for this important business market.”
The best way to optimise that market is to meet the demand for it, says Compton. “Another way is to invest in facilities, and we’ve done that whether it’s the United Club or bringing all our Star Alliance partners into one facility at London Heathrow’s Terminal 2,” he says. “It’s important to have good connectivity and facilities that are attractive to business travellers.”
What’s next for United in its own backyard – the US domestic market? According to Compton, the merger brought about balance for United’s route network. “Before the merger with Continental, we didn’t have a strong West Coast presence, and because of that, we lacked an Asia footprint,” he says. “United didn’t have a strong New York and Latin American presence. But now we have brought two complementary networks together.”
The airline will remove 130 50-seat regional jets from the fleet between now and the end of 2015, says Compton, noting that United will be bringing in 70-seat Embraer 175s over that same period. “The 50-seat jets are less economical to fly and the fact that our regional partners are dealing with the 1,500-hour rule for pilots means they’re having a harder time hiring, so they can’t fly the schedules,” he reveals. “We’ll be less dependent on regional airlines in the future.”
The big decision to drop Cleveland as a hub was taken because of pilot issues, says Znotins. “Some cities will see further consolidation. They may go from five flights a day with 50 seaters to three flights a day using an E175 or possibly even a mainline jet,” says Znotins. “We are going to reshape our network. Smaller cities will see changes, but you’re already seeing that industry-wide. You will continue to see more service on larger aircraft at the expense of smaller ones.”
One of the things United is doing is looking to drive toward more efficiency, insists Compton. “For us to continue to be profitable, not only do we have to deliver industry-leading revenue, we need to be more efficient in managing our costs and do things differently to deliver the product we want to deliver, but also be more efficient and low cost,” he states.
Compton uses the case of Denver International Airport (DIA) as an example. “More than a year ago, Denver worked closely with us to get a flight to Tokyo. The service was a good fit and works well because the B787 is perfect for the route,” explains Compton. “However, in addition to helping us expand our route network at DIA, the city of Denver worked closely with us to focus on efficiency and to reduce our costs at the airport. The concept we like is to find efficiencies and lower costs. That is critical as we at United do that, but it’s also a great message that other airports should continue to do that.”
So how does the airline stand nearly four years on from the merger? “We are truly a global airline,” says Compton. “Demand and economies are changing and a balanced network allows you to handle change in the industry. Consolidation is about more balance, more stability, the chance to reinvest in our people and our product and build strength for our shareholders.”
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