Loading summary
Transcript73 lines
- [00:02]
A
I'm John Ostrower, editor in chief of the Air Current.
- [00:04]
B
And I'm Brett Snyder, author of Cranky Flyer. You're listening to the Air show, the podcast where we talk about what goes on in the business of the sky. Today we are going to talk about United. And what makes this most fun is that Brian is actually on vacation this week, so he missed the big media day that was held right in his backyard here in Los Angeles. This was a very product heavy announcements, so we know Brian has thoughts, but John and I are going to do the talking today.
- [00:33]
A
Yes, we are from a high level. This whole event fit perfectly into last week's discussion about an airline's moat. Everything United has been doing is really about moat building. Short of bringing a backhoe to lax, United made its point. There is so much to unpack here and honestly we're only going to scratch the surface because there was just so much to cover to drive the point home. United highlighted that it was number one in its hub metro areas in only one place. That was Houston. Now it's number one in all of them except LA and SVP of Global Network and Alliances. Patrick Quayle proclaimed they will eventually be number one in LA as well.
- [01:12]
B
And to be clear, he gave no timeline. This was not some major announcement about LAX here. They're going to need gates for that, so it's not happening soon.
- [01:22]
A
Yeah, there was a lot of chest thumping at this event. Honestly, I'm just glad that United stopped short of saying that they're going to be number one in Atlanta. But let me also just add that a cult also made an appearance there. These fine folks go on every inaugural with Patrick Quail, who is also better known as pq and they dress up for it. And let me tell you, they were loudly cheering at everything he had to say. We deem them the PQP's.
- [01:47]
B
I like it.
- [01:48]
A
Yeah, but okay, back to business here. Managing an airline is about managing complexity. And what we saw from United were a lot of new, complex hard products. In fact, managing complexity may be United's real mode.
- [02:05]
B
Yeah, that's a good high level summary, but maybe we should set the stage for those who weren't there, because I think that's also important. But just to show what this really was like, United brought in hundreds of media, including a lot of influencers who are far younger than we are.
- [02:23]
A
So many influencers, so much influence, but
- [02:26]
B
they brought them all into L A for this. Where we all sat in United's hangar full of airplanes with fancy new enhancements. On them. And this was just a huge event. It was very well choreographed, clearly took an incredible amount of planning. And you think of all the different products that they were rolling out. And not to mention also a fair bit of money went into this, too. I do know. It was such a big event. You know, I think a lot of us did ask the question, is it the right time to do something like this with obviously the huge run up in fuel that's going on and things might turn south quickly and might that throw everything into disarray. But in a weird sense, I think United States may have actually been happy about the timing of this. It keeps trying to prove that things are different now for the airline. No, there's. There's no pronouncement that United will never lose money again. But the point was hammered home that United has been preparing for the next downturn and it is trying to be an airline that can continue to move forward with long term plans even when things don't look good in the short term. And this was on full display at this event?
- [03:34]
A
Absolutely. CEO Scott Kirby's version of we'll never lose money again was we'll never furlough again. He didn't say it in those exact words, but what he did say was that he wanted to build an airline that didn't need to furlough again when things got bad. Look, I've never equated Herb Kelleher and Scott Kirby to one another, but labor stability is really the key in the secret ingredient to managing complexity. So I agree with you that this oil spike played right into their hands to prove their point. United was not talking about altering their plans, battening down the hatches. I remember media Day in 2019, and there was a ton of products that felt like they would be gone the moment there was a downturn, which we had just a few months later with COVID I'm looking at you. United Club blanket warmer. Its focus was really on hard products that once they're on airplanes, they're there for the long haul. No pun intended, but yes.
- [04:24]
B
Yeah.
- [04:24]
A
Look, these investments have been on tap for a while, and I think there's a lot of strategic virtue to investing going into. Into a downturn, because on the other side, you're going to be ready while others are still rebuilding.
- [04:35]
B
Yeah, that was definitely the vibe, and I think you're right about that. They did talk about this. Scott Kirby was talking about how they almost look forward to downturns because when other airlines mismanage it and they're prepared, it Gives them opportunity to make gains. It's kind of crazy to say it with all the uncertainty that's out there, but that's. That was really how they were approaching this. And also to even drive that point home even further, in Scott's opening address to us at the event, what do you think it was that he said that really grabbed me was the part
- [05:08]
A
where he, unprompted, said he didn't think an airport shuttle model for EVTOLs wouldn't work when a full scale model of Archer and its midnight evtol was right there with him in the hangar.
- [05:20]
B
Okay, yes, that did, did raise some eyebrows. Pretty sure the Archer people in the room wanted to immediately disappear. But no, that was not what I was talking about. It was when Scott started talking about loyalty. And this is normally when I start zoning out and Brian starts salivating because this is not my jam. But Scott wasn't actually talking about the loyalty program. He was talking about literal loyalty. When's the last time we heard that? He was talking about what United can do to get more people to fly with the airline and continue flying the airline. So he went on about wanting to do something new and different every year to keep people talking and finding new reasons to keep coming back.
- [06:02]
A
What he said was he wants people to say, and I quote, wow, that's cool. And I have never seen or heard of that on another airline.
- [06:09]
B
Exactly. And it was kind of funny watching him on stage continuing to push on. Jason Birnbaum, the cio for all these things that he once done yesterday.
- [06:17]
A
Yeah, especially that talk about rolling delays. That was really interesting. Can you unpack that for us?
- [06:22]
B
Yeah. So this, to me is a great example. Scott was saying that he hates rolling delays, which is music to every customer's ears. Right. Because that is the worst. It's delayed 10 minutes, 20 minutes, 30 minutes, on, on, on. But what I found interesting that he said was that he doesn't have the data that he really wants, which is D0 for delays. In other words, if they post a delayed departure time, how often do they actually leave at that new time?
- [06:51]
A
That's when he said, quote, I think it's better than other airlines, but I don't think it's very good.
- [06:55]
B
Yeah, exactly. But he talked about how it's a mindset shift for the airline, and this is true because he, he knows why airlines do this. Right. He's been in this industry forever. They want to fly the airplanes as soon as they can when there is a delay. So they give the most conservative estimate and want People in the gate area waiting and then it just keeps slipping as they go and makes everyone mad. But he wants to give more realistic del times so people can go eat, whatever, take care of the kids, whatever they have to do, and do it with confidence and then come back when the posted delay is so they don't have to waste their time. And as he said, this might mean that some flights could have left earlier, but they didn't because they had posted a new time and they were sticking to it. Overall, that's probably still better. Some people might not like it, but just thinking about it in this way shows that they really are trying to do it differently than that it's always been done.
- [07:48]
A
Which I suppose gets us to the whole point of the event.
- [07:50]
B
Right.
- [07:51]
A
Sure, they had some product enhancements with food and things like that, but it was really the hard product that was either on display or at least being announced. They were really excited about talking about all of this, which ultimately points to their continued premium focus.
- [08:04]
B
Yeah. And do we think the premium focus is real and sustainable or is this just overly optimistic ego? Because after all, I, I think I, I heard the joke more than once that this was held in a hangar with the door open to be able to fit all their egos in the event.
- [08:19]
A
Yes, there was no shortage of confidence in the room. Well, United does argue that this isn't about new demand for premium. Premium demand has always been there, but now there's just enough supply to feed it. Look, I honestly think that was probably evident in with the rise of the Middle east superconnectors. Jennifer Aniston was a great vehicle to make that point. If you remember their Emirates ads where she wanders a an air at the cabin of a US airline looking for the shower. But Scott also made the point that if demand drops off, he doesn't think premium goes away way. Honestly, that's probably as much commentary about US income inequality than anything. But that's a wave that airlines are riding in the K shaped economy.
- [08:59]
B
Yeah, and I think it's. United's probably right about this, but they're putting 99 premium seats on some of these new deliveries, which. That's wild, right? That. That's a huge number of seats.
- [09:11]
A
Huge.
- [09:12]
B
But I suppose, look, if premium demand drops because everything may drop in different ways over time, they can always change configurations. But the point is they'll still want to have that premium focus because maybe the numbers will change as the economy goes up and down, but they're still going to be targeting those premium travelers with this product. And that's what they're going to have. But look, we've talked about the big picture enough. We haven't even gotten into what any of this means. So should we get into the details here about the fourth four and a half, maybe airplane announcements? Let's do that right after the break.
- [09:51]
A
Some people say that the three greatest words in the English language are I love you.
- [09:57]
B
Sure.
- [09:58]
A
But if you travel a lot, I'd argue that you've been upgraded is even better.
- [10:02]
B
Your wife may have something to say about that. Probably.
- [10:06]
A
But a few days before a trip, when you're deep in the usual spiral, timing, logistics, packing, all of it that you've been upgraded, email hits differently completely.
- [10:16]
B
Suddenly the whole journey feels more comfortable, more manageable, more like something you're looking forward to than something you need to get through.
- [10:23]
A
And that's why this matters to airlines. It's not just about sending an offer. It's about figuring out the right offer for the right traveler at the right time.
- [10:31]
B
That's what Plus Grade helps airlines do. It gives travelers more choice and control over their journey while helping airlines make more revenue from upgrades to preferred seating and beyond.
- [10:42]
A
A better journey for the passenger and a more effective way for the airline to grow revenue.
- [10:45]
B
Hard to beat those three words.
- [10:47]
A
I love you, Brad. Plus Grade helps leading brands generate billions in revenue by giving travelers more ways to elevate their travel experience. Learn more@plusgrade.com
- [11:01]
B
and we're back. Okay, John, where do we even start? I guess let's start with the biggest airplane in the room. We got to crawl around the brand new fancy 7879 with the so called elevated interior. This goes into service on April 22 from San Francisco to Singapore, then a week later from San Francisco to London. So this is not theoretical. This is happening. What was your take on it, John?
- [11:29]
A
It was a really sharp looking interior. But look beyond the bells and whistles, of which there are many, including a touchscreen for making the seat lie flat. Let's see how long that survives in service. By the way, I was really struck by how much of a throwback this airplane is. Go with me on this journey. If you look at a TWA 707 Lopa from the 1960s, half of the airplane was first class and everything from the wing all the way to the back was coach. So comparing the 787 and 707 Lopez side by side, it's, it's actually kind of stark. It's. We're back to the future here on the 787 9. The economy plus seats don't start until door three behind the wing. There are five distinct classes here. When you add the Polaris studio, I think they should have called it the big front seat, but I digress. You've got a regular Polaris business class seat. Premium plus, that's their domestic first style recliner. Ish Economy plus with extra legroom and United Economy. And by the way, that's even before they add the relax row starting in 2027. That's the OG Air New Zealand sky couch reborn for the US something for everyone.
- [12:41]
B
Yeah. And I, I will say when we were walking through this, you know, of course most people are up front looking at the fancy Polaris seats and taking videos and, and it, it was interesting to see the, the different configurations where they have one cabin with the reverse herringbone, the other cabin with the herringbone, giving people different options about how they want to sit together. That's great and all, but in the back, what about that? Right? And there was plenty back there to talk about. The screen is gigantic. It is a delight, I must say. You know, they, they're creating different opportunities for people in different classes in a way that they want you to know that they're not ignoring Coach. I think they said that multiple times that this is something that's important to them. And we did see that on some of the other airplanes as well. But, but this airplane, yes, it is a beautiful airplane on the inside. There's no question about that. But do they really need those 99 premium seats on a ton of routes? I guess we'll find out. But we did find out that not all of the new deliveries will have that. Some will only have 83.
- [13:50]
A
Only.
- [13:51]
B
Only. Well, that does include premium economy. So, you know, it's not a true flatbed. But, but they do like premium economy. And I remember Andrew Nisella, chief commercial officer told us that on most of their airplanes now, I guess they have three rows of premium economy and on these they'll have five. And they like that bigger cabin. That's done really well for them.
- [14:13]
A
So yeah, actually I asked Andrew about how they're going to revenue manage the introduction of the relax row. And effectively the answer was tbd. There's a lot of different ideas for how to sell it. You know, you're, you're a person traveling alone. Do you sell them all three seats? Is it less than the price of three seeds? If you're a family, how you do it? And ultimately, I think one of the big questions is how Much cannibalization of premium plus is going to happen here. And he actually acknowledged, yeah, there's probably going to be some but I think it's going to be interesting to see how that that really plays out.
- [14:47]
B
I also had some conversations about this with some other people. It sounds like they're going to be actively revenue managing this in maybe a different way than how Air New Zealand has done it where it's more of just a flat add on. And they can think about this in a lot of different ways. For example, if you're going to London in the middle of winter, you know, the front seats may be full, but coaches usually pretty available. They can sell that relax row for less knowing that those are going to be empty seats otherwise probably so it's just a way to get extra revenue in the door. But chances are if you're going to say like Rome in the summer, it's going to cost more because they know all those coach seats are going to be full. So I agree, you know what you got from Andrew, that they don't quite know how they're gonna price it yet or revenue manage it. I think that's true. They're gonna have to figure it out as it goes. But they already have ideas and there's a lot that they can do with it, I think.
- [15:48]
A
Okay, so we talked about the biggest airplane on display at media day. Let's talk about the smallest.
- [15:55]
B
Okay. This is my favorite. I know this is silly but man, I love this airplane. The CRJ450. This is what stole the show for me. This effectively what they're doing. They're taking the CRJ 200s which of course have those tired and worn 50 single class coach seats on board. They're going to pull those out and replace it with 41 seats. So that's seven first class, 16 economy plus and 18 regular economy. The first class seats have no overhead bins so it feels surprisingly spacious for a CRJ 200. And instead there is a closet up front with seven spots for roller bags, one for each of the first class seats.
- [16:41]
A
Yeah, this is the CRJ 550 strategy in a CRJ 200 package. I think I said to you yesterday that it kind of felt like a Scooby Doo villain, you know, pulling off its mask.
- [16:52]
B
It's insert CRJ, right?
- [16:54]
A
Yeah. Okay. With the, the CRJ 550, that's a 65 to 69 seat CRJ 700 adapted to to just 50 seats with an expanded coat and luggage closet. That mod was more considerable to make the 700 to a 550. Turning the 200 into the 450 is far less complex and it is a marketing name. But honestly I think one of the things that I walked away with from this was that if United could get more CRJ550s they would. But this is their next best option.
- [17:30]
B
Yeah, that's right. They did say they're increasing their 550s as well as part of this. I think that was sort of buried in there. But ultimately there are only so many airplanes you can get and they're pretty much hitting the wall with that. Sky west has I think 300000 CRJ 200s sitting in the desert, maybe not doing anything. So there's no shortage of CRJ 200-00 available. And I was told there's actually a fair bit of time left on these airframes there. There's still have a fair number of cyc can fly these well into the 2000 and 30s. But they just don't want to be flying this single class experience anymore because it's just not good for people. And man, when I walked on that airplane, God, feels so different. It's, it's wild. If you are in coach, yes. You're still going to hunch over to look out the window and there's still that awkward like foot ledge thing on the side.
- [18:23]
A
I love that thing by the way. That was actually my favorite part of the airplane.
- [18:26]
B
It's not bad.
- [18:27]
A
Well, because, because you have the window right next to your ankle.
- [18:29]
B
It is true, it's good. But you know, that's pretty much all that it shares with this. And it's also that because they have so many fewer seats and they have the closet up front, they now have more room to put roller bags sideways up in, even in coach into the existing overhead bin. So it's a better experience for everyone. And these airplanes are going to go into Chicago and Denver, at least in the beginning. They may get to Houston someday, someone told me. But it's mostly a Chicago and Denver airplane. Eventually that means that United will be all dual class and in both of those airports they're big domestic hubs. And so you know, that makes a big difference when they're trying to compete. And you know, then I thought about this as well and I got a post that's going to be going up on Cranky Flyer here shortly with some of these numbers. But there just aren't a lot of the routes that these airplanes fly anyway that are overly full. You think about a lot of the essential air service Routes. These don't have huge load factors, certainly some of them do. And they'll have to give up some seats that they would have sold. But they seem incredibly confident that the extra revenue from Economy plus and first class will easily pay for itself. And we've seen that elsewhere in the network too. So this is now just going to create more differentiation for them. And it goes to that point of we're not just thinking about long haul first class or business class, we're thinking about all the classes, we're thinking about all the cities, even the littlest cities.
- [19:58]
A
Yeah. What I love about regional jet strategy at airlines is that we only ever get half the story. Like the CRJ550 was a clever new product design, really well received. It's a 50 seat configuration in a bigger airplane. But what it really was was a way to keep the CRJ 7 hundreds away from American because of how scope clauses are structured and how many aircraft in each size class are allowed under the labor agreements. Rather than hand capacity to a competitor. United States had room for 50 seaters. So that's what they became. Look, United re upped the CRJ2 hundreds with SkyWest late last year and that laid the groundwork for this deal. And look, United gets to keep control of those aircraft and as you mentioned, keep a consistent product for a business class passenger, for example, from start to finish, all the way from a spoke on Chicago or Denver network all the way to, say Tokyo or Singapore.
- [20:53]
B
Exactly. So this to me is, is a great ad to the fleet and it does show how again, they're thinking about things differently and they're willing to invest to make these things happen. We will watch for this. It sounds like the airplane we walked on, it hasn't, not everything has been certified on the aircraft yet, so it won't be in service till later this year, but it will be coming very shortly. They're, they're ready to go. They're just waiting for a final sign off here. Now, John, let's talk about the two airplanes that they announced that we did not see in person because they are ready. Although they had pieces of this there. We had two A321neo announcements. You want to walk us through that?
- [21:32]
A
Yeah. This was a big part of the media day. United is going to be splitting 100 incoming A320neo family aircraft into two distinct categories. One is going to be the Coastliner. It'll be a distinct sub fleet of the 321neos and branded as such, these are United's first with CFM engines, by the way, they're going to have 20 Polaris seats, 12 premium plus 129 economy, 36 of which are economy plus for 161 total versus their 200 in the current layout. This is interestingly the revival of United PS, effectively. PS premium service from New York to LA and San Francisco.
- [22:16]
B
Yeah. So this airplane with 161 seats is. It may be similar to PS, but it is still much more dense than PS was. PS had far fewer seats on board. But you can compare it to the product that's in the market today and it is a bit of a, a mixed product. You have some wide bodies that have a full international experience and then you have 757s flying that don't have premium economy at all. They have fewer flatbeds, all that. So it's a bit mixed. This is going to standardize the experience. I don't know if there will still be some wide bodies on it. There very well may be at some point, but also will standardize this with the international experience because for the first time these seats in the front cabin will be considered Polaris, which before they were not. So they get all the Polaris benefits on the ground with access to the lounge and all that kind of stuff as well. So it is a nice change for Transcon and a nice upgrade while also getting pretty efficient with it.
- [23:14]
A
But let's talk about the A321XLRs. Now those are going to be Pratt powered aircraft. They'll also have 20 Polaris seats and 12 premium plus. But there will be 11 fewer economy seats. So 150 total. This is an airplane really for the six to eight hour missions. Think transatlantic and heading maybe down to South America. Side fact about the xlr, which is not unique to United, US Airlines are actually at a bit of a disadvantage with their airplanes on range capability.
- [23:43]
B
Why?
- [23:44]
A
Because the FAA assumed passenger weights are higher than EASA standards. The growing width of the American populace means that there isn't quite the same range capability. There's going to be a huge fuel savings on the, the generational shift with to this airplane. Like this is the end of the line for the 757, 200@ United.
- [24:09]
B
Don't say such things, John. Why?
- [24:12]
A
I know, but hey, this is our opportunity to pick up really cheap 757s for that Alaska based airline that we were planning years ago.
- [24:20]
B
Ooh, Austria Pacific.
- [24:22]
A
Yeah, an idea so bad we decided not to do it. Okay, so 50 coastliners and 50 XLRs coming. We'll see, the Coastliners, obviously between New York and California, and the XLR is heading to Western Europe and maybe even to Brazil, was what Andrew Nosella shared with me. From my individual perspective, this might have actually been the most surprising physical product display of the day. I had a chance to sit in the single aisle Polaris mockup, which came complete with a sidewall and a window. But what I was surprised by was that the feeling of shoulder space in that seat was significantly better. Nocello described it as wide body comfort on a narrow body plane. In another universe, this actually probably would have been on Boeing's Newman Market airplane, but that was shelved back at the start of the decade. One thing to remember is that the Coastliner, as a result of that, actually was supposed to be on the 737 Max 10. That airplane isn't certified yet, been delayed a number of times for reasons that we've talked about repeatedly on the show. I actually asked Andrew about this and he said that it wouldn't be too much of a stretch to assume that there's a Max 10 Coastliner in United's future too. Actually, according to United's 10K, the airline is expecting the first three Max 10s later this year once the FAA signs off. But those will not be in Coastline or Configur. And not a single person at United wanted to breathe a word about the airplane at the event. A notable absence.
- [25:50]
B
I want to go back to the Polarisy because I sat in that as well. And this was absolutely a mock up. They were constantly trying to fix the thing after everyone was sitting in it. But you know, we heard United management talk about the little things and how they constructed this and how important it was. They found that having the sidewalls slightly lowered and then finding a way to give more shoulder space. And then also they said they were using this translucent material so that it still provided privacy, but it allowed light to come in. All of these things together, from what they discovered, created something that had a much more airy feel, less like a coffin. It was a much better experience for people. And so they really have gotten to this point where they're paying attention to all these tiny things to try and enhance the product, which does make them feel different than a lot of other airlines. And on that note, they're, by the way, are very happy to point out how things are compared to other airlines. For example, on the xlr, they proudly said that they removed three seats so that they could put a snack bar in for anyone in the cabin in coach to go and get snacks during the flight. And they noted how this was not what their competitor with an XLR did, which, of course, is American. And that is true. And that is a row that I sat in when I got on American's airplane. And those are right next to the lav and are very uncomfortable to be in that position. So we didn't get a walk on the airplane. This one isn't. Isn't delivered yet. But they get very creative with this to figure out the right way to make a better experience for people.
- [27:37]
A
Yeah, look, I think if you step back from all of it, United has bitten off a lot here. There are serious cost pressures coming down the pike with fuel. And like, this airline is about to really test the thesis that growing rasm is the solution to rising chasm, not cutting costs. And that's actually a very Delta way of seeing the world. But a lot of what we saw from United went one big step further and focused on things that mattered the most to building an airline that people actually want to fly. Your move, Ed.
- [28:11]
B
You've been listening to the Air Show. If you have suggestions or questions for us, or if you're interested in sponsoring the podcast, go to our website, theairshowpodcast.com to get in touch.
- [28:22]
A
Leo Duran produced and edited this episode. Our theme music is by Joshua Mosher. Thanks for listening and we'll be back soon.