The Atlanta Journal-Constitution
United focuses on hubs in battle for supremacy
A year ago, United Continental Holdings Inc. startled the airline world with an aggressive growth agenda aimed at bolstering hub profits and reclaiming traffic — a strategy to win back passengers rivals had siphoned away in the nine years since the carrier’s chaotic merger.
One-third of the way into its three-year plan, United has declared the project a success and is plotting the next phase. Now comes the hard part.
United’s overall expansion involves adding as much as 6 percent of capacity annually. In 2018, much of that growth came from beefing up its schedule in Hawaii and larger U.S. cities, said Savanthi Syth, an airline analyst with Raymond James Financial Inc. United also plucked “low-hanging fruit” such as improving its operations and customer service, she said.
But in 2019, the carrier is concentrating on its hubs. While Delta and American have been minting money at their respective bases in Atlanta and Dallas-Fort Worth, United hasn’t been as successful with its hubs in Chicago, Denver and Houston. One of United’s top priorities is to close that gap.
“So far I don’t think there’s anything that they’ve done that causes alarm at other airlines,” Syth said. “It was always 2019 and 2020 that are the key questions on that growth.”
Chicago-based United is aiming at small-city growth, moving regional jets out of big markets in favor of flying mainline jets between hubs and hinterlands. To do so, it will use 40 new jets — its highest annual total since 2010 — plus an additional 25 Embraer 175s at its regional airlines.
United’s grand plan might just help it regain some of what President Scott Kirby called its “natural share” of the travel market.
American and Delta, however, might not see it that way. The good news for consumers is that, if the two rivals choose to retaliate, it could trigger a fare war.
Moves to counter United’s huband-spoke expansion will be easier if fuel prices stay low, making it less costly for American and Delta to add flights in the same markets. Still, executives at both airlines have noted that new flights into a dominant hub don’t typically spark major price skirmishing. More often, the Big Four (including Southwest) hit back at ultra low-cost rivals such as Frontier or Spirit Airlines Inc. should they encroach. In October, American Chief Executive Officer Doug Parker said his carrier hadn’t detected “any discernible market share shift” from United’s growth.
For its part, American is planning 3 percent capacity growth this year; two-thirds will be 100 additional flights from 15 new gates at its home base in Dallas, its largest and most profitable hub. The airline is working toward a goal of 900 daily departures from Dallas-Fort Worth this summer. Delta, which also is targeting 3 percent growth, already has about 1,000 flights per day at Atlanta, its biggest hub. By comparison, United has only about 600 at Chicago-O’Hare, its biggest.
All three carriers are keen to harvest profits with new flights this year from cities such as Augusta, Georgia; Madison, Wisconsin; and Santa Barbara, California — destinations where airfares are generally higher. “The environment’s going to get more competitive,” said Joseph DeNardi, an aviation analyst with Stifel.