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- United Air Lines, Inc.
77 West Wacker Drive
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Based at Chicago O’Hare, with secondary hubs in Denver, Houston, Newark, Cleveland, LAX, San Francisco and Washington Dulles, United Airlines is one of the world’s largest airlines. Using a large fleet of narrow and wide-body Airbus and Boeing aircraft, United Airlines operates an extensive domestic and regional network of services within North America as well as international services to Central America, South America, Asia, Australia, Europe and Africa. United Airlines is a founding member of the Star Alliance and announced a merger with Continental Airlines in May-2010.
Location of United Airlines main hub (Chicago O'Hare International Airport)
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2,405 total articles
United Continental pax traffic down 1% on Asia Pacific services in Nov-2013, load factor down to 78%
210 total articles
The saga that ensued after the US Department of Justice in Aug-2013 sued to block the merger between American Airlines and US Airways is now officially over. Arguably, not too much will change once the conditions of the settlement are implemented - which begs the question of why the two sides did not act more responsibly in the first place to prevent a protracted and futile legal exercise that only added extra expense to the already expensive proposition of combining two airlines.
The whole affair smacks of wasteful macho grandstanding. In the end, only limited concessions were imposed - but presumably the airlines had not been prepared to concede them in negotiations - and nobody comes out of this looking clever.
The bulk of the concessions agreed to by American and US Airways – slot divestment at Washington National Airport – was not surprising since speculation was rampant that the carriers would likely have to shed some slots at the airport in order to move forward. While American and US Airways opted to stick to their bullishness that no divestment was necessary, in the end holding stubborn to their beliefs resulted in a three month delay of the merger moving forward – hardly responsible behaviour for a company that is attempting to build a powerful global carrier.
Japan may be the land of the rising sun, but for US airlines the country is fading in importance. American Airlines, Delta Air Lines and United Airlines will have fewer seats from the continental US to Japan in 2014 than in 2013. Japan will also comprise a smaller share of their Asian network. American and Delta in 2003 had Japan as their sole Asian destination from the US, but in 2014 Japan will account for only 43% of American's Asia capacity and 66% of Delta's. United's Japan exposure has decreased from 67% in 2003 to 42% in 2014.
The carriers are adding capacity to Hong Kong, Korea and Taiwan, but the main beneficiary of their growth is mainland China. American and United in 2014 will have almost as much capacity to China as to Japan. The change comes as American and United settle into joint-ventures with Japanese partners while Delta looks for a partner of its own. Despite China's increase in capacity significance, the market still has to mature from a premium and outbound standpoint. And no doubt China-US JVs will emerge, and one day overtake the Japan-US JVs.
As Delta Air Lines continues a seemingly open attack on its partner Alaska Air Group at its Seattle hub, Alaska Airlines is stressing that alliances like its long-time pact with Delta are complicated. Its overall message is that it will work with Delta where it is mutually beneficial and compete vigorously as Delta continues its encroachment.
Delta’s latest moves are in two of Alaska’s key north-south markets on the US Pacific west coat – Portland and Seattle. Ironically, Delta seems to be practicing what Alaska executives recently stressed to analysts – removing emotion from evolving competitive dynamics. As Delta continues its moves into Alaska’s markets unabated, it certainly is showing no emotion as Seattle continues to rise in prominence in Delta’s domestic and international network.
Just how the current competitive build-up by Delta in Alaska’s markets will affect their long-term relationship is uncertain. But in the meantime Alaska continues to post financial results that are among the best in the US industry, which means that it has a strong foundation from which to defend itself.
US Airways believes it can recoup lost revenue triggered by a 16 day US Government shut-down after recording reasonably solid 3Q2013 results, including higher than expected unit revenues for the three months ending 30-Sept-2013.
As the outcome of the US Department of Justice (DoJ) challenge to block the merger of American Airlines and US Airways is tough to predict, both carriers are moving forward in network expansion on a stand-alone basis. For US Airways it means international expansion from its Charlotte hub as a means to close the gap in a variable financial performance from 2Q to 3Q, while American appears to be crafting a Pacific strategy that entails a build-up in Dallas/Fort Worth to strengthen its position in the trans-Pacific against United and Delta.
Underlying JetBlue’s recent headline grabbing release of its new premium product that includes semi-private suites, is a network strategy and expansion that continues unabated, resting on the pillars of expanding from Boston, Fort Lauderdale and its strategic base and headquarters of New York JFK.
The latest round of market additions adhere to the carrier’s stated goals of broadening its reach into the Caribbean as Trinidad and Tobago is added to its growing network in the region. At the same time, JetBlue’s milestone 50th destination from its ever-important Boston base is Savannah, Georgia, a largely leisure destination which presently is served by US majors with regional jets to their large hubs.
With the planned new service to Savannah, Port of Spain and Port Au Prince, JetBlue is taking a three-pronged approach, serving all those markets from its strategic bases – most notably Fort Lauderdale, a market JetBlue is growing as a launch pad for strengthened service to the Caribbean.
Seattle is emerging as a confronting new battleground for partners Alaska Air Group and Delta Air Lines as Alaska Airlines appears to be quickly answering Delta’s latest moves in key US domestic markets by fortifying its leading position on those routes – Las Vegas, Los Angeles and San Francisco.
Alaska appears poised to add frequencies on those routes beginning in Mar-2014 and continuing through Jun-2014. The move follows Delta’s declaration of launching new service from Seattle to San Francisco in Mar-2014 and adding frequencies in Los Angeles and Las Vegas during 1H2014.
The build-up in those markets by both carriers is occurring even as Alaska remains a key strategic partner for Delta in Seattle, and as Delta adds more international service from the airport buoyed by feed from Alaska’s vast domestic network. The heightened competition between the two carriers alongside their powerful partnership reflects the reality that loyalty only goes so far when revenue maximisation is the ultimate end game for any carrier, and Alaska’s efforts to maintain its passenger concentration in key west coast markets shows that it is willing to strike back at any carrier’s encroachment – even if its originates from an important revenue sharing partner.
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