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United Continues Efforts on Cost Cuts, Fleet Changes

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United Continues Efforts on Cost Cuts, Fleet Changes

United Continues Efforts on Cost Cuts, Fleet Changes
March 04
11:49 2015

MIAMI — United Airlines has made a lot of progress in its metrics but it’s not quite where it should be and will be working on closing the gap, said John Rainey, the carrier’s executive vice president and CFO in remarks at the JP Morgan Aviation, Transportation and Industrials conference.

United Airlines EVP and CFO John Rainey (Credits: United Airlines)

United Airlines EVP and CFO John Rainey (Credits: United Airlines)

“United has been a leader in capacity discipline and will adhere to that in 2015. Growing less than GDP is capacity discipline,” said Rainey. “We continue to install Wi-Fi and slimline seats, along with upgrading the regional airline fleet. We’ve been way too reliant on 50-seat regional jets.

“It was great when we first purchased them 10 to 15 years ago, but even with fuel prices, there are better options today,” said Rainey. “We’re replacing them with Embraer E175, 76-seat aircraft. We’re taking on 53 of those aircraft this year.”

In 2012, United’s fleet was 56 percent mainline, 44 percent regional aircraft, said Rainey. By the end of 2015, the airline will be at 60 percent mainline and 40 percent regional aircraft, he said.

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A United Express Embraer ERJ-145 at Houston Intercontinental (Credits: Eric Salard)

“We’re consolidating frequencies and actually reducing departures by four percent but upgauging by six percent mostly by adding E175s and cutting 50-seat RJs. This will allow us to increase revenue.” he said. “There has been a dramatic improvement in the aircraft because the E175 has first class, Economy Plus and no middle seats.”

United is enhancing its network by rebanking to improve directional flows in hubs, especially those that rely on east-west flows, said Rainey. The airline rebanked Denver and Houston Intercontinental in the third quarter of 2014, and will do Chicago O’Hare in the second quarter of 2015 to improve passenger flow and optimize connection times, he said.

United achieved $3 billion in ancillary revenue in 2014, said Rainey. “Our goal is to increase that by $200 million in 2015,” he said. “We can do this with new product and existing things like the ability to price Economy Plus at 16 different price points.”

The carrier has demonstrated strong cost performance and is on track to achieve $1 billion in non-fuel annual savings by 2017, said Rainey. Productivity improvements will drive $500 million in annual savings by 2017, he added.

“A big part of our cost savings initiatives is productivity improvements, by three percent in 2014 and the same in 2015,” said Rainey. “A big part of this is the deployment of self service for customers. For example, Boston has self-bag tags and check-in.

“Eighty-five percent of passengers are now doing this and they don’t see a human being until they’re greeted by a flight attendant,” said Rainey. “This frees our employees to provide other customers the service they expect when they need help.”

 

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Benét J. Wilson

Benét J. Wilson

Mother, Aviation Queen, Veteran Aviation Journalist, AVgeek since age six, number one fan of the Boeing 747 and Student pilot (can't stick my landings). I would actually pay rent to live in an airport. bwilson@airwaysmag.com @AVQueenBenet

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