Airline says it will keep all 5 U.S. hubs, turns profit at DIA
By David Kesmodel, Rocky Mountain News
July 20, 2004 United Airlines has turned an operating profit at Denver International Airport over the past 12 months, despite "terribly high" fuel prices, and plans to keep all five of its U.S. hubs as part of its restructuring, a top executive said Monday.
"United is committed to all of its hubs, not simply because they are there, but because they perform clear and present benefits for each and every one of our regions throughout the country," John Tague, United's executive vice president for marketing, sales and revenue, said in a phone message to employees
His comments come as the giant carrier strives to raise financing to allow it to emerge from the industry's largest bankruptcy. Some experts say United might need to shut down one of its hubs or sell certain overseas routes in order to attract equity investors or lenders.
The carrier, which lost a bid for more than $1 billion in U.S. loan guarantees last month, is satisfied with its seat capacity today and where it chooses "to compete with it," Tague said.
Those who suggest United's path to success involves shrinking the carrier substantially are wrong, he said. "Let there be no mistake: We are not in retreat nor is it in our financial interests to be in retreat."
That doesn't mean the carrier won't continuously make changes to its schedule to improve profitability, he said. For example, the schedule from its biggest hub, Chicago O'Hare, will see changes this fall.
He said UAL Corp.'s United has "right-sized" - or revised its fleet and schedule - more than any other large U.S. hub-and-spoke carrier.
At DIA, United's No. 2 hub, United is "competing effectively" and "taking back market share" with the help of Ted, its discount carrier, he said. Most important, United's financial performance at DIA "has improved dramatically."
He gave no details of United's operating profit at DIA, and a spokesman didn't elaborate. Operating results exclude interest payments and special gains or charges.
Tague said Chicago-based United's performance at DIA served as evidence that critics who speculated it couldn't "win on the bottom line" with a budget airline-within- an-airline were "simply wrong."
Overall, United has reported huge net losses in bankruptcy and has posted operating profits in only a few periods of the proceedings, which began in 2002. Its first-quarter net loss was $459 million.
Besides Denver and Chicago, United has hubs in Dulles, Va.; Los Angeles; and San Francisco.
Tague said United was making big strides in improving its revenues and believes it's on a path to "clear leadership" in revenue performance among the big network carriers.
He echoed the comments of other United executives from recent weeks, however, by underscoring that United must continue to lower its costs, which remain among the industry's highest on a per-seat basis.
United, DIA's busiest carrier, is "not out of the woods . . . but I think things are improving a little for them," said Thom Nulty, a travel management consultant in Monarch Beach, Calif., and a former executive at American and Continental airlines.
He said he wasn't surprised United planned to keep all of its U.S. hubs. Cutting a hub might hurt sales more than it helps costs, he said.
Nulty raised questions about the issue of profitability at the Denver hub, as did Stuart Klaskin, an airline-industry consultant in Miami.
"To zero in on profitability by hub can be difficult," Nulty said. "What expenses are allocated to that and what are allocated to the corporate office?"
Said Klaskin: "You can move numbers to show a lot of things."
He said United has improved its market share in Denver through extremely aggressive pricing, which has hurt Denver-based Frontier and Miramar, Fla.-based Spirit. Spirit, a client of Klaskin's, recently said it will leave the Denver market.
Klaskin disagreed with Tague's statement that United has right- sized itself more than any other big U.S. hub carrier.
"I would say American takes that prize, no question about that," he said. "American has said, 'Look, we're going to play to our strengths, and we're going to be the most efficient legacy carrier on a worldwide basis.'
"United remains tied to a strategy of being all things to all people, saying we can get you from Des Moines to Tokyo and all things in between. In the world of low-cost carrier competition and worldwide alliances, I believe that's a dinosaur model."
By David Kesmodel, Rocky Mountain News
July 20, 2004 United Airlines has turned an operating profit at Denver International Airport over the past 12 months, despite "terribly high" fuel prices, and plans to keep all five of its U.S. hubs as part of its restructuring, a top executive said Monday.
"United is committed to all of its hubs, not simply because they are there, but because they perform clear and present benefits for each and every one of our regions throughout the country," John Tague, United's executive vice president for marketing, sales and revenue, said in a phone message to employees
His comments come as the giant carrier strives to raise financing to allow it to emerge from the industry's largest bankruptcy. Some experts say United might need to shut down one of its hubs or sell certain overseas routes in order to attract equity investors or lenders.
The carrier, which lost a bid for more than $1 billion in U.S. loan guarantees last month, is satisfied with its seat capacity today and where it chooses "to compete with it," Tague said.
Those who suggest United's path to success involves shrinking the carrier substantially are wrong, he said. "Let there be no mistake: We are not in retreat nor is it in our financial interests to be in retreat."
That doesn't mean the carrier won't continuously make changes to its schedule to improve profitability, he said. For example, the schedule from its biggest hub, Chicago O'Hare, will see changes this fall.
He said UAL Corp.'s United has "right-sized" - or revised its fleet and schedule - more than any other large U.S. hub-and-spoke carrier.
At DIA, United's No. 2 hub, United is "competing effectively" and "taking back market share" with the help of Ted, its discount carrier, he said. Most important, United's financial performance at DIA "has improved dramatically."
He gave no details of United's operating profit at DIA, and a spokesman didn't elaborate. Operating results exclude interest payments and special gains or charges.
Tague said Chicago-based United's performance at DIA served as evidence that critics who speculated it couldn't "win on the bottom line" with a budget airline-within- an-airline were "simply wrong."
Overall, United has reported huge net losses in bankruptcy and has posted operating profits in only a few periods of the proceedings, which began in 2002. Its first-quarter net loss was $459 million.
Besides Denver and Chicago, United has hubs in Dulles, Va.; Los Angeles; and San Francisco.
Tague said United was making big strides in improving its revenues and believes it's on a path to "clear leadership" in revenue performance among the big network carriers.
He echoed the comments of other United executives from recent weeks, however, by underscoring that United must continue to lower its costs, which remain among the industry's highest on a per-seat basis.
United, DIA's busiest carrier, is "not out of the woods . . . but I think things are improving a little for them," said Thom Nulty, a travel management consultant in Monarch Beach, Calif., and a former executive at American and Continental airlines.
He said he wasn't surprised United planned to keep all of its U.S. hubs. Cutting a hub might hurt sales more than it helps costs, he said.
Nulty raised questions about the issue of profitability at the Denver hub, as did Stuart Klaskin, an airline-industry consultant in Miami.
"To zero in on profitability by hub can be difficult," Nulty said. "What expenses are allocated to that and what are allocated to the corporate office?"
Said Klaskin: "You can move numbers to show a lot of things."
He said United has improved its market share in Denver through extremely aggressive pricing, which has hurt Denver-based Frontier and Miramar, Fla.-based Spirit. Spirit, a client of Klaskin's, recently said it will leave the Denver market.
Klaskin disagreed with Tague's statement that United has right- sized itself more than any other big U.S. hub carrier.
"I would say American takes that prize, no question about that," he said. "American has said, 'Look, we're going to play to our strengths, and we're going to be the most efficient legacy carrier on a worldwide basis.'
"United remains tied to a strategy of being all things to all people, saying we can get you from Des Moines to Tokyo and all things in between. In the world of low-cost carrier competition and worldwide alliances, I believe that's a dinosaur model."
