United CEO Jeff Smisek makes it official that United’s 3 cabin first class is on the way out,
“One aircraft he won’t be buying is the A380. “That is a product for state-subsidised airlines, or airlines that have it and wish they didn’t,” he says. Another thing he doesn’t like is international first class. “It’s a money loser, and we will be eliminating it over time. For example the 767s that have it today, as they get retrofitted you will not see it reappear. The problem is that it takes a lot of real estate, and people are not willing to pay for that. I suspect the other carriers, apart from the subsidised Gulf airlines, would say the same thing.”
Mind you, United has what is usually ranked as the worst 3 cabin international first class in the airline industry, so it’s no surprise that it’s a money loser. Why would anyone pay for United first class when the competition’s first class offerings are far superior?
And it’s not just the gulf carriers with successful first class products, United’s own joint venture partners ANA and Lufthansa have successful first class products. As do other Star Alliance airlines like Asiana, Singapore, Swiss, and Thai.
Sure, not all routes are cut out for first class, but the demand is there. That demand is just voting against United’s extremely lackluster product. Of course United themselves tacitly acknowledges this as since last year they charge a fraction of the miles for first class on their own flights as they do on partner first class flights.
Smisek eliminated first class on United’s JFK-LAX/SFO p.s. transcontinental routes a few years ago, even as American went ahead with a new plane order affirming that first class demand exists on those routes. Later this year United will completely retreat from JFK as they waive the white flag against competition from American, Delta, Jetblue, and Virgin America.
Of course Smisek’s motto is “Ultimately, we can’t create demand, but we do have a responsibility to react to it.”
As in, why proactively improve our first class product to compete when we can just reactively decide that it’s not profitable and eliminate it.
The irony is that Gordon Bethune, one of the most popular airline CEOs of all time, wrote in his excellent book “From Worst to First” exactly how that kind of reactionary thinking is what nearly drove Continental out of business is the early 90s. Or as he put it, “You can make a pizza so cheap, nobody will eat it. You can make an airline so cheap, nobody will fly it.”
Smisek may think that United is unable to create demand. The truth is that they’re quite adept these days at driving away premium demand.
At the beginning of 2014 United had a whopping 9 domestic hub airports (Chicago, Cleveland, Denver, Guam, Houston, Los Angeles, Newark, S. Francisco, and Washington/IAD)
Is Guam next?
A few months ago I had the unique experience of flying on the Island Hopper to Guam. It had been on my bucket list for a decade and I’m glad I did it when the opportunity arose.
8 months ago United eliminated flights from Guam to Hiroshima, Niigata, and Okayama. They also reduced the number of daily flights to Sapporo and Tokyo, meaning that the Island Hopper could no longer connect to Tokyo.
In September United will eliminate flights from Guam to Cairns, Australia and from Guam to Seoul. AJK and I had debated whether to fly the Island Hopper to Cairns for the Great Barrier Reef and then United up to Seoul via Guam connecting to Asiana first class to get back home. Ultimately flying to Palau and then home via Tokyo on ANA first class won out as it meant we would be home for Shabbos (well, it would have meant that had United been willing to hold a flight for 6 people for a few minutes as they did for 1 dog for 45 minutes). Korean still connects Seoul to Guam, but nothing else connects Cairns to Guam.
Now these reductions don’t have to spell the end of the Guam hub. But as Brian Znotins, VP of United’s network strategy, explained to me in 2012, hub airports can go into virtuous cycles where flights keep getting added as more people flow through the network, or vicious cycles with flight cuts that eventually spell a hub’s doom.
It’s not looking good for Guam.