Quite some aircraft swaps for the “new” United in Asia this fall

FlyerTalk member Bear96 posted about some upcoming equipment changes to the new United in Asia. The changes so far are as follows:

· HKG-SGN moves from UA 747 to CO 737 (effective October 30, 2011)

· HKG-SIN moves from UA 747 to CO 737 (effective October 30, 2011)

· GUM-NRT moves from CO 767 and CO 737 to UA 777 (effective October 30, 2011)

· HNL-GUM moves from CO 767 to UA 777 (effective October 28, 2011)Additionally, we also plan to begin new, four-times-a-week CO 737 service this fall between Guam (GUM) and Okinawa (OKA), Japan, as well as daily CO 737 service between Narita (NRT) and Hong Kong (HKG).

Without exaggeration, when I saw the news I immediately checked the date the post was made, since I figured it was an April Fools joke.

Look, while I don’t have the slightest clue about the airline’s cost structure, I’m a numbers guy. In other words, I’m not going to say “United needs to keep flying 747s to Singapore because they look prettier.” So I’ll try to stick mostly to the facts.

United’s 747s have 374 seats, while Continental’s 737s have 134 seats. In other words, capacity is being cut by nearly two thirds. That’s huge.

The loads have always been light on Hong Kong to Ho Chi Minh City, though back in the day I remember a friend at United mentioning that they were okay with that. As it was explained to me, the cost of parking a 747 overnight in Hong Kong is astronomically expensive, while flying it to Ho Chi Minh City and parking it there overnight, even without great yields, would make financial sense. After all, aircraft utilization would just be awful, sitting in Hong Kong for 18 hours. Not only is that a lot of time for an airplane to not be making money, but Hong Kong is the last place you want to park for that long. So that’s one reason I’m surprised by this news.

Of course then there’s the customer’s perspective to consider. There’s no doubt United needs to do what’s best for their bottom line, but they shouldn’t take a short sighted approach to that. I’ve flown to Asia dozens of times, and typically end up taking a flight to either Tokyo or Hong Kong, and then connecting onwards from there. While I don’t usually sleep very much on the first flight, I always sleep on the second flight, so a flat bed is pretty valuable there. Of course I’m not all that important to the airline as an upgrader and award passenger, though I can assure you that most paid premium cabin passengers feel the same.

There are a lot of Global Services members that have been loyal to United largely because upgrades are easy to come by, because in other aspects United can’t compete. I know a lot of Global Services passengers that fly paid business class to Asia, and then upgrade to first class. They could fly Singapore Airlines, but stick to United because United first class is roughly comparable to Singapore’s new business class, and it’s Mileage Plus that’s the deciding factor. Do you really think someone flying on a $10,000 ticket is going to choose to fly United to Singapore now, only to be in a first class suite for 15 hours and then a domestic first class seat for the last four hours? Yes, one could fly through Tokyo instead, which still has a 777 to Singapore, though most 777s still feature the old configuration, which I would never book if I were on a paid premium cabin ticket.

Basically, I’d love to have been a fly on the wall at WHQ when this decision was made. I’m sure the numbers checked out. I’m sure the yield per passenger for Hong Kong to Singapore is going up substantially. But I’ve gotta wonder if the minimal cost savings (as I imagine them to be) are really worth it.

At the very least it seems to me to make sense to either change the departure time of the San Francisco to Hong Kong flight or the departure time of the Hong Kong to San Francisco flight so that the plane doesn’t sit on the ground in Hong Kong for 18 hours. Why not make the San Francisco to Hong Kong flight a late night departure (like the one Cathay Pacific has) or the Hong Kong to San Francisco flight a late evening departure (like the one Cathay Pacific has as well)? That way the plane wouldn’t sit on the ground for more than a few hours in Hong Kong.

On the plus side, the Tokyo to Hong Kong route is back, even if it’s only on a 737.

And yeah, I fully admit I’m being an armchair CEO. Take what I say with a grain of salt…

Comments

  1. Flying a 747 to HCM to save on HKG’s high “parking” costs only makes sense when fuel prices are low.

    Also, you say you’ll stick to the facts, but you don’t offer any. Your analysis may or may not be correct, but without data on yields, elasticity of demand, etc., it is all conjecture.

  2. @STL-bingo on all counts. What’s the saying: “don’t let the facts get in the way of a good story”?

  3. The return of HKG-NRT should be given more press. With any luck, this will relieve pressure on SFO-HKG and potentially make upgrades viable for non-GS again.

  4. I guess I’m confused about a couple things here: So are the two 747’s (one from SFO and one from ORD) that are currently used for SGN/SIN going to sit overnight at HKG? Or will they be redeployed somewhere else?

    And second, how are the two 737’s going to get to HKG so they can continue on to SGN/SIN? Is UA adding routes to HKG from somewhere I’m not aware of?

    At any rate, I did the HKG-SGN flight a couple years ago while living in HKG; I was *A Gold, purchased a discount Y fare, but was upgraded to C on the 747 because Y was oversold! So the load looked pretty good that day! Glad I got to do it on a 747 while I had the chance!

  5. Reality is catching up to fiction. Remember ‘Lost?’ They flew a narrow body from HNL to GUM in the last season (before, of course, the plane landed on the Lost island).

  6. @SCL. The info he has sounds confidential, I doubt he was supplied with the actual operating results of a particular route.

  7. It would appear to me they predict japan flights to be empty empty empty, so they can push passengers thru japan to sin or hkg, but yes 737 is embarrassing. It won’t last long… 767s will take over these routes 🙂

  8. I don’t understand how it benefits anyone, because looking at flights next week, the HKG-SIN flight has over 260 seats booked (300+ on SIN-HKG, 49 of those in premium cabins, which alone would probably bring in more revenue than an entire 737). Only about 70 seats booked in November, but I’m sure that would rise to well above the 134 seats if given the chance. I know I won’t be flying through HKG from effective October 29th.

  9. The fuel vs. parking costs will likely change with fuel at new highs. Also, adding in CO’s flights to HKG gives the new UA some additional flexibility with the timetable.

    The HKG-NRT flight is likely a placeholder for a short-haul NRT slot plus a way to rotate in CO pilots to operate the HKG short-hauls.

    UA really isn’t competitive on these routes (product, brandawareness in Asia for short-haul). The flights may be full but the yields are likely low. With fuel being higher, the flights are likely bleeding money.

    Also – the opportunity cost for the 747s are high. Tweaking the timetable like lucky mentioned to reduce ground time at HKG will likely free up capacity for the 747s to operate some CO routes. (EWR-LHR perhaps?)

  10. I think this change makes sense, to be honest. I’m not saying I like it. As a business traveler, I fly on SFO-PEK, SFO-NRT, and SFO-HKG. There are pretty heavy loads on these. SGN is not a huge business destination. Neither is Guam. The only thing that really surprises me here is HKG-SIN.

    But as you mentioned, one could still book NRT-SIN. Perhaps UA will follow this up w/ beefing up the NRT hub a bit? Maybe they want to get rid of connecting flights in HKG, as they’re a U.S. carrier anyways, and if they’re going to have an international hub, might as well make it NRT? I dunno!

  11. Very disappointing. *Alliance members will switch to other carriers within group for seat comfort, whether planning to travel Bus. or First. Maybe, projected business is down more than we can imagine.

  12. I don’t plan on going to another airline, but I will end up going via NRT (which really is better because it more miles), and while that will suck for business/first for the next few months, the new 777s will be making their way over there, so it won’t be really any different other than the layover airport (and the RCC at NRT is far better than the one at HKG).

  13. UA typically undercuts the incumbents on HKG-SIN/SGN, which would explain why loads are high but yields are junk. This is the old NW strategy in Asia- high volume, low yield.

    It’s unlikely that many high-revenue pax will switch just because the 2h segment after the longhaul is operated by a narrowbody. They still need to get there, and last time I checked, SQ doesn’t accept UA SWUs. 😉

    Besides, what’s the difference between this and flying NRT-SFO-DEN with a 757 on the last segment, or IAD-FRA-ATH with a LH A321 on FRA-ATH?

  14. @ Kris Ziel, the change in demand is pretty much seasonal. Remember, it’s Easter holidays (and labour day on 2 May) in Hong Kong this/next week and the UA flights are often filled with tour package pax. (low revenue)

  15. I am taking my business to SQ on HKG-SIN-HKG routes starting in October. I am a full C paying passenger and GS. I am upset, but understand the financial reasons behind the decision. However, it may not be a good business reasons, because UA potentially will lose me on transpac flights as well.

    UA is losing me to SQ on HKG-SIN-HKG, and it also may lose me on NRT-SIN-NRT because the old seats on the 777. It may also lose me between US West Coast to HKG/SIN because the pricing may be lower if I fly the same airlines all the way down to SIN whwn needing to make stops in NRT/HKG for meetings. Purchasing a UA/SQ combo C tickets are more expensive than just buying from one single carrier. The switch of 737 from 744 will could lose UA $40,000 of my transpac business each year.

    I am glad I am close on making PPS from my intra-Asia flighs between China and Southeast Asia.

    Fly SQ A380 or CO 737 between SIN and HKG?….the choice is very obvious.

  16. I see your point about the domestic segments, which I hadn’t though about, but it still is pretty pathetic to have a 737 flying an international route like HKG-SIN.
    The change is effective come November, which, when I went last year that plane was packed (two of us were top 5 of the biz waitlist and we made it with one space to spare, so it wasn’t like the plane was full of tourists). I think United will end up seeing a lot of people who fly a ton like UA_Flyer going elsewhere, while the people who fly business over there infrequently are going to end up being a little annoyed, but take it as it is.
    And lastly, why does it matter if yield is garbage? The plane is going to sit at HKG anyway, and by down gauging to a 737 you force people to go to other airlines, because the SIN-NRT flights I have been on are packed, so the 737 cuts SIN capacity by about 40% while load factors are probably 80% or 90%. I’m not privy to why they made the decision, but it seems like many people will have no option to fly another airline, certainly NRT/HKG-SIN, and it would make sense they would book everything with that carrier.

  17. I think could be maintance issue for some aircraft changes. HKG-SGN should be the one since 744 is hardly to be repaired in SGN, HKG-SIN might due to some D check (just guess).

  18. UA/CO has done much the same to UAs CDG-IAD flights, switching those to 757s. A single aisle, 2 lav in Y for TATL? Maybe for DC based UA diehards, but many of the rest will move over to LH, where a short hop to Frankfurt gets you a wide-body with true int’l IFE, and drinkable (and free) wine.

    UA/CO has it’s objectives, and I have mine.

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