Iflyjets:
Iflyjets asked: Chip, does that mean the U could cancel most of their leases and turn themselves into a regional feeder, flying RJs, for United?
Chip answers: No, in fact it increases the opportunity to fly more mainline aircraft for a number of reasons. By now having tremendous leverage on aircraft lessors, the company can lower its aircraft rental expense and more profitably operate aircraft with its entire operating with market rate interest expense of about 5.5 percent. If an aircraft lessor will not renegotiate the lease payment, they can have their jets back where since September 11 over 1000 jets have been retired.
There is a report on the message board where US may have obtained five used A-320s, which was a strategy I was told could be used to replace rejected aircraft by a member of the US Executive fleet.
The UA code share plan only provides for US or UA to obtain revenue for the portion of the trip where the passenger flies on the individual airline. Therefore, it behooves the company to fly long haul flying to obtain the greatest amount of code share revenue.
If my memory serves me correct, US intends to grow Caribbean and long-haul transcontinental flying from its hubs which may include new service Belize, Guatemala City, Mexico City, Panama City, Panama, Oklahoma City, Tulsa, Austin, San Antonio, Albuquerque, Tucson, Colorado Springs, Salt Lake City, Portland, Reno, Sacramento, and Ontario.
As RJs come on line to increase feed, grow long-thin markets, and fly in some current mainline markets, there will be more traffic to fill up mainline aircraft in the current and new markets listed above. I understand the business plan is to place MDA aircraft on current B-737 routes, the B-737s on East Coast A-319 routes, and redeploy A-319s into the long-thin mainline markets listed above.
This will increase stage length that will further drive down unit costs, just like obtaining market rate leases that will reduce lease expense from 11 to 5.5 percent and the monthly aircraft rental on a B-737 from $250,000 to $270,000 to about $120,000 per month.
By the way, there is reason to believe UA & US have been negotiating for US to obtain some of UA’s flying.
Chip