United Airlines

US carriers to slash fourth quarter trans-Atlantic capacity as Europe's outlook dims

Increasing economic uncertainty in Europe has resulted in US carriers pulling back capacity to the continent later this year to proactively contain losses and a drop-off in traffic that could result from the increasing likelihood of Greece’s exit from the euro zone and the Euro falling to a two-year low against the US dollar. Delta has already stated its goal to reduce capacity 5% across the Atlantic during the fourth quarter, while United has already instituted schedule changes that show a pull-down in secondary European markets. US Airways, which during the last year has enjoyed marked success in its trans-Atlantic business segment, has not declared any plans regarding its capacity to Europe later in the year. But the carrier is launching several seasonal services on the back of its strong performance in the European market.

Trade group Airlines for America (A4A) estimates that during the fourth quarter of this year US carriers will reduce their capacity to Europe by 7.8% as they attempt to better manage seasonality and stave off effects of a recession on the continent. This change is significant as Western Europe is still the largest international market from the US.

New Denver-Tokyo 787 service to help boost United's sagging trans-Pacific performance

United’s plans to launch new flights from its Denver hub to Tokyo Narita Airport in Mar-2013 with its 219-seat Boeing 787 comes at fortuitous timing. While North Asia-North America traffic has been growing, primarily at the behest of Asian carriers, United is the best positioned of US carriers to take part in this growth since it achieves the highest trans-Pacific yields. Combined with anti-trust immunity with Japan's All Nippon Airways (ANA), which is already showing benefits, and United's market leading position in the US, United will be able to grow the market.

Yet trans-Pacific yields are the lowest international ones for United, as it is with other US carriers. The trans-Pacific market does not have the strong corporate and leisure base of Europe or the VFR traffic of Latin America. With yield growth being more limited, the 787 will help the bottom line with its step change in efficiency, reducing costs. United will certainly not be the last carrier to take advantage of changing competitive dynamics.

Integration headaches trigger 1Q loss at United as its revenue performance lags the industry

Persistently high fuel costs and challenges in a passenger system information technology cutover pushed United Airlines into a loss for 1Q2012 as its unit revenues lagged behind US legacy peers. Forecasts for the month of Apr-2012 show the lacklustre revenue performance continuing before heading into May-2012 when comparisons become increasingly difficult due to numerous fare increases pushed through in 2011. Despite the weak performance relative to the rest of the US airline industry, United remains confident it is taking the right steps through its merger with Continental Airlines to remain competitive over the long term. But for the moment the carrier is not disclosing a timetable of when it might close the unit revenue gap with its industry peers.

Special charges related to the passenger service system cutover in March and other integration expenses pushed United to a 1Q USD448 million loss compared with a loss of USD213 million the year prior. The cutover was the final step in combining United and Continental, and now that it is complete the Continental name has been retired.

Southwest intensifies its campaign to launch international service from Houston Hobby

Southwest Airlines has bolstered its efforts to introduce international fights from Houston Hobby Airport through the introduction of an elaborate campaign – freehobbyairport.com – to encourage Houston residents and its larger passenger base to lobby city officials to allow it to forge ahead with plans to carry out its often talked-about desire to serve near international destinations from the US through the construction of a USD75 million-USD100 million international terminal at the airport. Not surprisingly, Southwest has won support from the Houston Airport System (HAS), which operates both Hobby and Houston Intercontinental Airport. It is now up to the city council to decide how it will balance Southwest’s request against the opposition of United Airlines, which dominates air passenger traffic in the Houston metropolitan area and at Houston Intercontinental specifically. If Southwest succeeds in its quest to launch new international flights from Hobby, it must ensure the new facility meets the expectations of US passengers, who have a general distaste for bare-bones airport facilities.

United continues international network shifts and drops service to Accra in Ghana

United is moving international capacity around its largest hubs in what appears to be an effort to maximise its network now that a crucial passenger service system cutover is complete. The IT system cutover allows United and Continental, whose merger is now complete, to fully utilise the combined networks and properly cross-fleet to operate optimal-sized aircraft in United’s markets. One of the more prominent changes is the elimination of flights from United’s Washington Dulles hub to Accra, which was the carrier’s first point in Africa when the route was launched in 2010. Other changes include the seasonal elimination of flights from Washington to Moscow and from Newark to Rome.

The changes will support an overall revised capacity forecast for United this year. The carrier has refined its 2012 capacity guidance from an overall decrease of 0.5% to 1.5%, compared with a previous estimate of between growth of 0.5% and a drop of 0.5%. United’s international capacity is now projected to grow this year by 0.3% to 1.3%, but some of that will be driven by new long-haul flights from Washington Dulles to Doha beginning in May, followed by Dulles to Manchester and Dublin.

China Eastern announces June-2012 Boston service as North Asia-North America traffic flows increase

After many years of waiting for Asian service, Boston Logan International Airport will see two Asian services this year after China Eastern Airlines announced it will open a daily Beijing-Shanghai route from 01-Jun-2012. The route launch follows recent CAAC approval. While Japan Airlines (JAL) will be the first Asian carrier to serve Boston, with a Boeing 787 service to commence on 22-Apr-2012, it is worth contemplating the speed with which China Eastern can launch its route compared to JAL. While JAL has had open access to Boston for many years, the Beijing-Boston route authority had been sitting idle since being granted to Hainan Airlines/Grand China Air in 2006. China Eastern’s approval for the route indicates Hainan has lost the route authority.

China Eastern is expected to take up the capacity in the short-term, reflecting the underlying strong potential of the China-US market, as well as the increased agility Chinese carriers have compared to fellow North Asian carriers in Japan, Korea and Taiwan.