Executive Vice President and Chief Financial Officer Gerry Laderman and Executive Vice President and Chief Commercial Officer Andrew Nocella answered questions from Helane Becker at the Cowen and Company 12th Annual Global Transportation Conference.
The format was Q&A rather than a formal presentation as Delta and American had given, and the questions largely softballs (even when Ms. Becker said they were hard).
You can tell that United still sees itself in a mode of expansion, talking about 4% – 6% per year growth while American talks growth at the same pace as the overall economy. That much has been consistent since airline President Scott Kirby made the case for growth to investors nearly two years ago. Initially investors were skeptical but have since largely come around to Kirby’s view of United’s best course forward.
During the discussion there were four things that stood out to me as being interesting, even if some were relatively tangential for analysts covering the stock.
- United is planning to ‘flip’ two of its banks at their Denver hub. Denver’s second and third banks are going to flip directionally. That’s because people on the West Coast get up earlier and are more open to 5:30 a.m. and 6:00 a.m. departures, so it makes sense to offer them Eastbound connections through Denver.
At the same time those early flights haven’t sold as well for United on the East Coast. According to United “people on the West Coast have to get up earlier” because of the east coast business day. That’s certainly my life experience as well.
- Expect more seats per flight. While “at some point United moves from connectivity to gauge, large aircraft will mean lower CASM, right now we’re focused on connectivity” which they define in simplest terms as the number of aircraft on the ground at the same time.
However they have an opportunity to put more seats on airplanes which they say they haven’t done the way that competitors have. Overall, we can expect more seats per departure in next 3-5 years.
- Don’t want to fly the MAX? They’ll move you. United’s approach to passengers discovering at the airport that they’re flying on a 737 MAX, once it returns to service, is that anyone who doesn’t want to get on the plane will be put on a different flight. They anticipate customers may not realize the aircraft they’re flying in advance, but passengers will see it on departure boards at their gate.
- Poor customer experience is great. Andrew Nocella came over from American Airlines with Scott Kirby, and had been in charge of marketing and loyalty when AAdvantage was devalued. His views on customer experience are well known. So it’s no surprise that he’s “really happy with basic economy.”
United is the only airline that still doesn’t allow basic economy passengers to bring a carry on bag onto the aircraft domestically (just a personal item). They also do not allow basic economy customers who aren’t checking a bag to use mobile check-in — they have to stand in line.
They say basic economy allows them to offer cheap fares they have to offer, though of course they offered those same fares before so this is disingenuous. It allows them to keep people who care about their experience from buying United’s cheap fares, instead either spending more money on United or flying someone else.