A few tidbits from United‘s Fourth Quarter 2016 Earnings Call. United gave us detailed information on the 747 retirement and their new Basic Economy fare class.
Key Accomplishments in 2016
- Ratified new labor agreements for all United employee groups
- Achieved the best on-time performance in history
- Delivered the most zero cancellation days ever
- Opened several new international routes to key growing markets
- Introduced the new United Polaris service
- $628 million in profit-sharing for the year
2017 Capacity Outlook
- First quarter capacity growth to be up 1% to 2%
- Biased towards higher domestic growth, less international – mostly due to the 747 retirement below
Near-term Commercial Initiatives
- Implementing network changes in Chicago, Houston, and New York later this year.
- Roll out of Basic Economy later this quarter for travel beginning in the second quarter – see more information below
- Continuing the Polaris rollout as quickly as possible
- Continue working on the revenue management system
- 15 widebody deliveries scheduled this year
- Plans to move up by one year the retirement of our 747 fleet – will now retire all 20 remaining 747s by year-end
- 14 new 777-300ERs, two of which were accepted in December 2016 and the remaining will come in the first-half of 2017 will essentially backfill the 747 capacity and routes
- Further exploring widebody and narrowbody fleets and order book plans
- Actively seeking opportunities in the used aircraft market
- 24 Embraer 175 aircraft to be delivered this year
- Do not intend to retire the 50-seat fleet just decreasing the number
- In the process of getting out of the smaller 37-seat regional jets
As American Airlines just did, United now gives us more guidance on their new Basic Economy fare class rules and regulations:
- Will begin to sell tickets later this quarter for travel beginning in the second quarter
- Very clear communications about the rules and restrictions
- Want all of the other entities that sell United tickets doing the same thing – as we’ve already seen with Delta’s Basic Economy, this may be difficult to pull off
- United is forecasting $250 million in additional revenue this year from Basic Economy alone – clearly this isn’t to lower fares
- Initial roll out will be in Minneapolis only as all of United’s hubs are serviced from there – roll out across the entire domestic and near haul international system not too long after launch
- Will contemplate long-haul international after that – long haul international with just a personal item?
- They will attempt to collect carry-on sized bags in the lobby, if a customer gets to the gate with a carry-on sized bag they will be charged at the gate a bag fee plus the handling fee – no announcement of what this gate handling fee will be, but Spirit is currently the highest at $100 if you bring your bag to the gate and pay after boarding, although I’ve never actually seen this charged
- Not going to ask flight attendants to monitor if a Basic Economy passenger puts their personal item in the carry on bin – more like they know there is no way for flight attendants to enforce this, Spirit doesn’t even enforce this
This year will be an interesting one where the big three legacy carriers – Delta, United, and American – all attempt to compete with the high profitability of the Ultra Low Cost Carriers – like Spirit, Frontier and Allegiant.
Do you think this new Basic Economy fare class will be a race to the bottom for the legacy carriers?