United Airlines realigns trans-Pacific network to benefit from U.S. domestic connections

by WILL HORTON  

July 1st 2019

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United Airlines (UA) is moving past its merger to leverage combined assets. Read More » In June, the carrier removed “Continental” from its holding company name. It also is re-assigning its Hong Kong slots by ending a former Continental Micronesia route to Guam in favour of a second daily San Francisco flight.

While the industry talks of declining yields and a possible downturn, UA’s managing director Greater China and Korea, Walter Dias, sees UA out-performing the market average. The carrier’s Asia network, the largest of North America airlines, is benefitting from improved or new connections as it adds domestic capacity at a faster rate than its peers.

This was a long time coming for Dias, who joined UA from Continental, a carrier that had a better reputation than UA but was much smaller in Asia. In his Continental days, Dias envied the permutations UA had between Asia and North America and also felt there were plenty of options UA had overlooked.

Dias told Orient Aviation that when he heard UA’s new management would strategically grow domestic U.S. flights, “I was sitting here in Hong Kong saying yes, finally, we’re going to do what we should have been doing 10 years ago”, he said. “We were having trouble selling to our customers in the interior of the U.S.”

Better connections are helping UA expand faster than the market average. After a 5% increase in U.S.- China passengers in the first five months of the year, forward bookings are projecting 10% industry growth in the next four months, the peak summer season.

“For the first five months we were well above the industry average. With all nine months together we’re slightly above the industry,” Dias said. “We’re cautiously optimistic.”

UA’s plan for a second daily Newark-Shanghai flight is looking promising after American Airlines (AA) returned it to route authorities at the end of June.

In Hong Kong, UA has up-gauged Newark to a 777-300ER. From October, it will replace a daily 777-300ER service with double daily 777-200ERs. Chicago will remain a 777-200ER route. The additional San Francisco flight uses slots from the Guam flight that will be cancelled as a result of a downturn in greater China tourism to the U.S. island territory.

The second San Francisco flight will introduce new times for UA customers with evening departures in both directions. The new schedule will eliminate one of UA’s three overnight aircraft parkings in Hong Kong, where light maintenance was provided by HAECO. Improved aircraft utilisation is part of UA’s aim for low Cost per Available Seat Kilometre (CASK) growth. It also will roll out a dedicated premium economy product.

So far, Hong Kong has a higher booked load factor than other destinations, Dias said. More medium to long-term, Dias expected UA to finally open non-stop flights to Guangzhou and later develop a joint venture with Air China. UA announced a Guangzhou-San Francisco flight last decade but cancelled it before launch at the onset of the Global Financial Crisis. The Guangzhou flight would still likely connect with San Francisco, UA’s hub for Asia, but no announcement is expected soon – not even in 2020.

“The power of that San Francisco gateway will eventually tell us we need to have a non-stop service to somewhere else in the Greater Bay Area,” Dias said. “Guangzhou continues to grow and transform itself from what it was even five years ago.” UA has a sales office and a call centre in Guangzhou and roaming sales agents in Shenzhen.

It is working with the U.S. government to integrate its Hong Kong flights with ferry terminals around the Greater Bay Area. “We were the catalyst for bringing in the Department of Homeland Security and Transportation to look at the ferry terminals and make security appropriate for people to check-in for a U.S. flight at the ferry terminal,” Dias said. “A lot of other places would like to have facilities like that.”

Security still has to be completed at Hong Kong airport, but passengers can check their bags and receive their boarding passes upstream and then board a ferry. UA is partnering with Mainland booking engine, Ctrip, to build packages that include a free ferry ride to Hong Kong International Airport.

The carrier has backtracked on starting secondary China services. It has ended Xi’an and Hangzhou flights and scaled down frequencies on its only remaining secondary destination, Chengdu. “What’s happened in the secondary cities right now does not necessarily reflect opportunities in those secondary cities,” Dias said.

A surge of growth to first tier cities saw airlines offer discounted connections to secondary cities to fill trans-Pacific flights, Dias found, which undermined the viability of non-stop flights to secondary cities. “There was too much overall capacity in the country. The tier one cities have kind of gone beyond the demand curve,” he said.