Serious Question For Chip

[Bear96]

Chip,

I have noticed both U and UA have been expanding into the Central American / Caribbean markets recently. You know the details of the U operation better than I, but as far as UA goes, in the last couple of months UA has announced or started new or expanded services to GCM, SJU, AUA, STT, and today, UA announced a IAD-SJO nonstop to start in Feb.

My question is, how does this square with your idea of an ICT/UCT? It seems odd that if the plan were for the two companies to become more aligned, they wouldn't both be going after the same markets. It doesn't make sense from a marketing perspective; and it would seem to set the stage for problems with a future integration as the government would be concerned with too much "overlap" in these markets.

I am wondering what are your thoughts on this?

 

[Light Years]

I'm not spouting the UCT or whatever it is, just playing the devils advocate... but if there were to be a merger of some sort, dont you think thats exactly what would happen?

UA is building on US's passenger base in the Carribbean by offering service to (da-da!) DIFFERENT cities with DIFFERENT connecting opportunities.

Just an off the wall example here, lets say for instance US Airways and Northwest merged. Dont you think that you might see more flights from PHL to places like Milwaukee, Flint, and Lansing, as well as more flights from Detroit to Allentown, Charleston, and Manchester? Airlines that are partners dont just send thier pax on connections on the other carrier, they expand on that airlines local presence by offering thier own service that might not have been feasible without the built in customer.

 

[Bear96]

Just an off the wall example here, lets say for instance US Airways and Northwest merged. Dont you think that you might see more flights from PHL to places like Milwaukee, Flint, and Lansing, as well as more flights from Detroit to Allentown, Charleston, and Manchester?

No. If NW and U were to merge, I would NOT expect to see U suddenly start service to a bunch of cities in the upper midwest in the period just before the merger.

And if they did, I would expect that to be something the DOT or DOJ would require to be changed before they would approve any merger, because they would say it is too much of a monopolization of those markets.

Remember the last U/UA merger attempt-- there was the plan to scale down service to DCA should the merger have been approved because of too much market control in the DC area the merged airline would have; and one of the things people kept on (and still are) spouting about it was that it was a "match made in heaven" because there was little other route overlap. U was strong in one part of the country; UA was strong in others.

Does that logic no longer apply, and if so why; or was it faulty reasoning in the first place?

 

[tadjr]

The reason for the DC scale down was that the flights at DCA were slot controlled and limited to anyone else. Adding flights from IAD/PHL etc to places that arent controlled is not the same thing. If UA wanted to start adding flights from ORD to ROA/ILM/AVL, that shouldnt be a problem with any type of transaction in the future since anyone can add service to those cities. It was the controlled airports (DCA/LGA and the hub to hub routes) that were the major problem. With UA and US adding limited flights to these cities (SJO, etc) it is doubling the perceived presence of both carriers at the same time since the flights could be code shared if approved.
Also in the NW example provided, what would stop the combined carrier from adding those flights after the approval was granted? I think as long as the new service isnt in controlled airports there wouldnt be a problem with it.

 

[USFlyer]

This is another example of U/UA taking advantage of their partnership. The only way US could add EGE is a result of the UA-US codeshare. Ditto with the Saturday service IAD-SJU on US's part. And, as for UA, expanding to the Caribbean makes sense as the combined UA-US will only be able to steal more traffic from other carriers. US has stated it wants to operate, for example, to PDX. I wouldn't be at all surprised if they happen to start seasonal service to such a market. Or seasonal service to YVR. Etc. The UA relationship (and eventually Star Alliance relationship) allows strategic growth opportunities such as this.

Given today's marketplace where the name of the game seems to be stealing market share instead of generating lots of new traffic, UA-US are clearly trying to offer enough frequencies when both networks are combined to dwarf the competition in reservation systems. Now add in LH and it gets even better. Spanair is in the works, too. And I wouldn't be surprised to see US add Mexicana as a codeshare partner as well. We could easily see maybe 3 day/week service to Acapulco on peak travel days, with Mexicana covering the other days thru MEX (especially now that US added daily MEX service).

 

[usairways85]

But wouldn't UA's recent expansion to the Caribbean/Latin America just compete with ppl connection through PHL to the Caribbean? If they really are going to try to gain a stronghold in the caribbean than AA is the only force they have to recken with and i dont think Caribbean expansion from IAD and PHL will do much of that.

AA just announced a ton of new caribbean flights from BOS and JFK to the caribbean, why not try to add more flights from BOS.

 

[Light Years]

While DCA and IAD may compete (as the carriers are supposed to, US is not going to stop serving PHL-ORD just because UA does), service to the islands from other UA hubs adds service options rather than competing directly. Most of U's Carribbean/LatAm service (at least when I was working them) arent really connectable from the west. ORD service adds options for other originating points as well as local Carribbean markets.

And of course there will be service added in a merger situation. With more hubs and focus cities, you add service. The mergers that make up US Airways are a good example. Someone will have to provide the details, but if I recall Allegheny/USAir didnt fly west of Phoenix until PSA- then of course US started service to California cities from its own strongholds.

Even in the network today, US serves alot of Southeast cities direct from the Notheast that were a result of the Piedmont merger. They didnt just not serve Greensboro from anywhere else because it was already served from Charlotte.

When airlines merge or codeshare, they do so to expand thier market share and take advantage of the others strenghs. The issue with the US/UA merger was the Washington DC area- of the three airports, the new airline would have had a major hub at each- US at DCA and BWI, and UA at IAD. As for most any other airports, it doesnt matter to the DOJ what you do. If United Airlines decides tomorrow that it wants to serve 22 cities non-stop from Casper Wyoming its thier business, monopoly or not. In the NW/US example, the justice department would not object to the new airline serving MSP, DTW, MEM, CLT, PHL, PIT, DCA, BOS, LGA from Flint because other carriers are free to serve them as they wish. DCA, and LGA (possibly BOS) are slot controlled with US holding most of the slots, and until a couple years ago ORD was too. These are the airports the DOJ is concerned with.

 

[767jetz]

It seems odd that if the plan were for the two companies to become more aligned, they wouldn't both be going after the same markets. It doesn't make sense from a marketing perspective; and it would seem to set the stage for problems with a future integration as the government would be concerned with too much "overlap" in these markets.

Bear 96,

You read my mind today! I agree with you 100% Expanding into each other's markets may mean some more direct service, but connecting traffic would suffer to a greater degree if a person can go from SJU to let's say LAX via IAD, PHL, CLT, and ORD.

People also seem to be forgetting that there is an overcapacity problem. If either airline were planning to take over parts of the other in a UCT, they would want to re-allocate some of their own excess seats to those new markets.

As you said, the whole point of the original US/UA idea was the minimal overlap. It's interesting to note also that UA is expanding into USAir's markets, but USAir is not expanding into UA's.

IMO there are many things changing behind the scenes as UA starts to regain strength, and US starts to lose ground. In yesterday's USA today, Benchmark Co. analyst Helane Becker was quoted saying, "I think they (US Airways) emerged from Chapter 11 way too soon. There are rumors they may have to go back into Chapter 11 to get costs down further."

I think this is a sign that UA intends to protect itself by not relying soley on codeshare traffic, and building it's own presence in certain markets, just in case the landscape changes.

Respectfully,

767jetz


PS. GO YANKEES!!!

 

[Phantom Fixer]

767jetz,

The average U employee sees it exactly that way too.
Dave and Crew has done nothing to actually better our position...other than treating it's greatest assets like we're the enemy.

The only projected expansion U is going to do is via RJ's...and the lions share going to third party companies like Mesa.

Sure we are talking about going to more European Cities...and that's great...but look at the parts of our own country that U doesn't even try to serve...that's just saying here ya go with some of our FF's to those whom we attempt to compete with....and attempt is about all we are actually doing.

I appreciate the UA/US codeshare agreement...but as it's being pointed out , We are eventually going to enjoy less benefit from it , as UA moves in on more of our market areas.


I have to agree that maybe U did emerge a bit prematurely..but I think it was more of a need than a simple desire to do so.

 

[Light Years]

Oh, ok....

I'm sorry, I didnt realize this post was just part of a p**sing contest with Chip. "nyah nyah, were serving an island you do from our own hub, youre airlines toast!". I wouldnt have bothered with my posts and examples had I known.

United Airlines is bankrupt. US Airways was forced out of bankrupcy and is piddling along with misguided management. There is not going to be any merger, right now the carriers are like two drunks holding each other up in a bar.

For the most part, youll notice the U posters ignore the crazy transaction theories... can you guys? If its UA, keep it on that board...

 

[USAirBoyA330]

"There is not going to be any merger, right now the carriers are like two drunks holding each other up in a bar"

Isn't that the truth. Funny and so true!

 

[USA320Pilot]

Bear96:

I have to fly tomorrow and I will respond to your questions this weekend. However, US Airways senior management has been at WHQ a lot that past couple of weeks.

More later...

Chip

 

[T-bone]

The only reason that could be cited for US comming out of bk early would be missing the example of a thorough spanking that the employees of UA got in bk. Dave would have put that lesson to good use.
Don't kid your self, we're all in dire straits, and I hope all survive, so we can laugh about it later. The alternative to bad managment is self evident.

 

[Fly]

T-bone Posted on Oct 24 2003, 02:03 AM

The only reason that could be cited for US comming out of bk early would be missing the example of a thorough spanking that the employees of UA got in bk.

Are you serious? I feel luckier to be employed at UAL rather than U everyday.....even as we are in BK. If the posts on this board are true and accurate then I can't imagine a more horrible situation to find myself in than working at US Air. When I work flights at United, I am proud of the service I present, the products we provide and the cleanliness of the cabins that we travel in. Although we had to accept the concessions this year, it is reassuring to know that our company honors these packages as they were written and doesn't try to reword them as to cause more strife for their employees. I have seen an incredible "can do" attitude from the employees and believe this type of morale will help us forge ahead.

We do not spend time hoping and praying for another carriers demise but rather we work to fix what WE did wrong.

 

[Light Years]

Fly-
Glad to hear the morale is improving there. Maybe United's service will improve after bankrupcy- they've never been known for thier people skills, especially for flight attendants. My ex was a UA flight attendant and hated the company, the job, the passengers(!) , the pilot group, the crew desk, most other FAs after working for a month or two... I could never understand it, it must be different cultures at different companies. If the morale is as good as you say it is, then wow, anything can happen. I hadnt heard anything about the great morale or the rave reviews of Uniteds service, but Ill take your word for it. If they are happy with thier concessions, good on them for being such good sports! Best of luck.