4 Things I Learned From a Presentation to Investors By 2 United Airlines Executive Vice Presidents

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.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I should think the MAX plan will cause pandemonium at the gate (as well as incredibly high spoilage). But who knows? Maybe no one cares? Maybe they’ll jack up authorized seats and play VDB-roulette?

    I do see a great SDC opportunity for savvy MAX flyers though!

  2. As to your second point, I heard it a little differently. Nocella noted that they have been growing “frequency depth” to fix the structural connectivity issue, and eventually will reach a point at which they “transition from connectivity to gauge.” There, he talks about *replacing* smaller aircraft (50 seaters). By comparison, AA and DL have been able to introduce larger gauge (large RJs, 100 seaters). Laderman notes that this opportunity is “ahead of” UA, so it only makes sense that he’s referring to a transformation/upgauge of regional capacity.

    There was the comment that they haven’t “done as much as competitors” in terms of increasing seats per departure on existing airplanes, but UA has already densified its cabins (slimlines/slimlavs on narrowbodies, 3-3-3 787s and 3-4-3 777s, etc.), so I’m not sure what he’s getting at. It’s possible that he’s referencing the mostly neutral reconfiguration of the A319/320s to add another row of F, but this comment seemed like more of an afterthought in the context of a discussion about the company’s desire to increase gauge at the low end. Time will tell.

  3. AA is still recovering from Kirbyitis, they have hit rock bottom and are going to “fix” the damage over the next few years. UA is going down the old AA and US Airways road. Not good news for UA hubs and loyalists.

  4. @sunviking82 – one can argue that AA has gone down a worse path since Kirby left… there’s certainly no shortage of awful there, either

  5. I guess I must be the odd man out because I detest early morning flights and avoid them at all costs unless absolutely necessary (i.e. return flight home from Eastern Europe connecting in Germany). However the “flip” makes sense in that fewer people travel Westbound early am because (1) most business travelers want to get a full day work before flying West and (2) those heading home won’t spend an extra night back East and (3) those who are still on West coast time (like me) don’t want to wake at some absurdly early hour to fly home. Nothing to do with stock market.

    That being said I was happy to see one sliver of good news for those of us who don’t plan to fly on Boeing MAX planes anytime soon. I expect many people will avoid them until there is a proven track record, i.e at least a year without any similar incidents.

  6. they have talked about upguaging between hubs for years …yet United still flight 50 sets RJ’s between Washington Dulles and LGA/EWR

  7. I will fly basic economy on American or Delta if necessary for a short haul flight. I have never flown basic economy with United and do not expect to. I know they think they can get more people to buy up, the worse they make it. But do they consider the people booking other airlines instead of flying United at all?

  8. Dave – agree with your comment on flying AA or DL basic economy. Given UA’s restrictions I would never fly it but works well for me on AA. Since I’m currently EP (and lifetime platinum) I get to check a bag free if I want (almost always carry on), board with my normal group due to status (2 currently then 3 when I slide back to Platinum) even on basic economy and can buy a seat 7 days in advance that is covered under my Amex Platinum $200 airline credit. About only thing outside of day passes to Admiral’s club or paying my daughter’s checked bag fee on her way back to college that I can use it for since rarely pay fees for anything else. Only downside I have on BE is no chance at upgrade (which is getting harder anyway) and fewer miles credited to my account but that isn’t a big issue when I can save $200-$300 picking BE over the main cabin fare.

  9. No mobile check in for untied basic economy? Even spirit and frontier allow mobile check in. Do they like higher labor costs to think they can catch someone with a carryon? As search options become smarter people will continue to book away from untied like they did on the bAAsic economy fares vs DL’s basic fares that included carryon.

  10. “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.”

    please double check this fake news. only worthless non-status losers are subject to it. Any elite, even silver status, can bypass that and bring regular carry-on.

    No mobile check-in is also fake news cuz i’ve used it before, with an orange boarding pass generated for my iPhone wallet app.

  11. @Grant I’m sure UA is happy to hire another TA vs have flights leave 5-10 min late due to multiple gate checked bags (and arguments over the outrageous $55 fee)

  12. This year I have started boarding flights last (when I know I don’t need space for my carry-on) and have anecdotally seen a huge uptick in Group 5 Basic Economy boarding. People are buying the product. I need every PQM and PQD I can get to keep Platinum status, otherwise I would probably take the BE fare for 50% qualifying miles and I can still bring bags anyways.

  13. Not allowing a carry on bag onto the aircraft with the cheapest fares is genius.

    To be able to carry bags on the passenger side of the aircraft is a luxury, and one that is very expensive for the airline to implement (notice how much longer flights take to board now vs. before everyone was incentivized to bring them onboard to avoid fees)?

    And the very last people boarding with their huge carry-on when there’s no space left are the ones that cause delays and drive all the extra cost (ramp loaders dedicated to loading these bags for an on time departure). I can totally see why UA isn’t changing the policy!

  14. “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.”

    It’s even worse than this. To be eligible to check in, your “personal item” needs to be inspected by a staff member, so you can’t even check in at the kiosk until you hunt down an elusive agent to inspect your bag.

    And it’s even worse:

    ONLY TWO AGENTS in the whole airport are “authorized” to inspect your bag, and regular agents don’t have the authority or the code to allow you to check in.

    So you have to wait while the agent you tracked down tracks down the correct colleague, who is highly unmotivated to help you.

  15. @henry LAX says:
    September 5, 2019 at 11:59 am

    “No mobile check-in is also fake news cuz i’ve used it before, with an orange boarding pass generated for my iPhone wallet app.”

    @Henry you are mistaken. I am United Silver and the one and only time I ever tried to fly with United Basic Economy I was unable to check in either online or at the kiosk until a specially authorized United rep “inspected” my personal item. This took almost 35 minutes and I nearly missed my flight. During those 35 minutes I tried multiple times to check in online, and also the regular agent (who was not “authorized” to inspect my bag confirmed multiple times that I was not allowed to check in online or at the kiosk until my personal item was inspected.

  16. Grant says:
    September 5, 2019 at 11:37 am

    “No mobile check in for untied basic economy? Even spirit and frontier allow mobile check in. Do they like higher labor costs to think they can catch someone with a carryon? ”

    Grant, to answer your question it is purely a punishment to induce you not to fly basic economy if you can possibly afford the premium for regular economy. If they just wanted to “catch” people and charge them a fee for the carryon, they could let the gate agent force you to gate check your bag.

    If they thought this might be inconvenient, they could at least “authorize” all check in personnel to look at your personal item and check you in, instead of purposely having only two agents “authorized” to do so.

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