United Airlines announces flights into Delta hubs

[Hatu]

United Airlines on Monday that it will begin nonstop service from its Los Angeles and San Francisco hubs to Atlanta and Minneapolis-St. Paul, which happen to be Delta Air Lines hubs. The announcement comes out six days after Delta announced new nonstop flights from its Seattle gateway to Los Angeles and San Francisco, plus Las Vegas. United said it will have two daily non-stops between San Francisco and Atlanta and between Los Angeles and Minneapolis-St. Paul. http://aviationblog....elta-hubs.html/

 

[WorldTraveler]

This has been discussed on the DL forum but a few things to note:

DL's mainline CASM based on the latest quarterly reports (which will be updated for both DL and UA within a couple weeks) was over 7% lower than UA's mainline CASM. DL's consolidated CASM, including regional carriers, was about 5% lower.

DL's CASM will be going down fairly significantly over the next year as the 717s and 739s enter the fleet and replace older aircraft. Yes, UA is replacing older aircraft as well but analysts seem to believe that DL's CASM reduction will be more significant in part because UA continues to face increased costs associated with merger integration while is gaining personnel efficiencies because of their fleet renewal.

DL's hubs at MSP and ATL are far larger than UA as hub carriers at LAX or SFO. The strongest hub carrier on one end of a route almost always carries the largest amount of traffic and has a revenue advantage which also means they can sustain competitive battles longer.

DL is in stronger financial shape than UA.

All of this may not be near as significant if the real target is Virgin America who is likely to be most hurt by all of this expansion at SFO.

Long-term UA could be better off if DL's actions help put more pressure on VX.

Further, DL's expansion at SFO also seems to be targeted at positioning DL as the 2nd largest carrier at SFO. Based on the combined AA/US traffic at SFO this past summer, DL would be #3 behind UA and new AA among network carriers. But DL is growing SFO while AA and VX are both shrinking, based on current schedules nor next summer, which means that UA could end up with DL as a stronger competitor at SFO but a weaker AA and VX which might be more beneficial to UA in the long-term.

You may or may not agree but those are some perspectives which will play into what is going on in the market.

 

[WorldTraveler]

UA announced that its RASM increase for Sept. was flat while other airlines including DL and US have both reported healthy RASM increases in the 5-6% range. UA blames increased competition to/from China.

 

[WorldTraveler]

It's also worth noting that DL and UA have both reported their expected fuel costs on a quarterly basis and DL's estimated fuel cost is between 8 and 13 cents lower than UA.

We'll soon know if the refinery is finally paying off but if it is then it explains all the more why DL is in a position to be much more aggressive.

Remember that WN's aggressive growth in the early 2000s was when it had a fuel cost advantage relative to the network carriers.

We haven't seen any of the network carriers have a significant long-term cost difference between each other up to this point but if DL is really able to do that, it has significant implications for the airline industry.