United Airlines today said it is reallocating resources around its global network to emphasize international routes, while substantially slimming down domestic mainline operations. By next spring, international flying will represent more than 40 percent of the airline's capacity and fully half of mainline revenue.
"Our strategy has been to continually align our fleet size and deployment with market conditions, which are brutally competitive," said UAL chairman, president and CEO Glenn Tilton. "Fundamental changes in our industry, including ongoing high fuel costs, intense pricing pressure and continuing overcapacity, demand that we take aggressive steps now in implementing this plan to ensure that United remains competitive."
Specifically, United by March 2005 will reduce mainline aircraft to 455, representing 68 fewer than last summer and 112 fewer than the 2002 fleet size. In the domestic market, mainline capacity will be reduced 12 percent, with some service being shifted to United Express regional operations. Specific service changes were not announced. Unlike Delta, which recently decided to dismantle hub operations in Dallas Fort Worth
(BTN, Sept. 20), United said it would continue operations at its five U.S. hubs: Chicago, Denver, Los Angeles, San Francisco and Washington Dulles.
Overseas, capacity will grow 14 percent. United did not detail new growth plans, but this year already has launched or will launch new routes to Beijing, Buenos Aires, Ho Chi Minh City, Nagoya, Osaka, Shanghai and Zurich, as well as several new destinations throughout Latin America and Canada and additional service to Sydney. It also has applied for authority to begin nonstop service from San Francisco to Guangzhou.
All told, United's network changes by March will result in 3 percent less capacity compared with current levels, but the airline said the revamped system emphasizes "broad connectivity for premium customers." In fact, a premium transcontinental service is scheduled to launch this month between New York JFK and both Los Angeles and San Francisco
(BTN, Aug. 2).
"The dynamics of today's industry environment, with fuel prices at an all-time high, require significant changes to address industry overcapacity," said John Tague, United executive vice president of marketing, sales and revenue. "For the last 24 months, we have continued to exercise discipline in adjusting capacity to meet market conditions."
However, today's announcement appears to be a reversal of United's capacity adjustments in the past year. According to Travel Analytics, the airline increased available seat miles in the domestic market 16 percent between September 2003 and September 2004, easily the largest increase of any major carrier. In a monthly traffic report issued yesterday, United said North America capacity grew 9 percent in September and more than 6 percent year-to-date. Though United's rate of capacity growth slowed from mid-year, when the first-half increase in ASMs exceeded 13 percent, the year-to-date numbers still were highest among the Big Six network carriers.
Recent capacity growth at United, and its peers, largely continues to represent restoration of services pulled down after the September 2001 terrorist attacks. Overall numbers across the industry, and at most individual major network carriers, continue to be below high-water marks in 2000.