By Edward Russell, The Points Guy
 |
| © Provided by The Points Guy |
MSN has partnered with The Points Guy for our coverage of credit card products. MSN and The Points Guy may receive a commission from card issuers.
United Airlines is prepared for the possibility of a dramatic makeover once the coronavirus pandemic is past, including the possibility of cutting one of its eight hubs across the U.S.
None of the Chicago-based carrier’s hubs are “sacred” when it looks at rebuilding after the crisis, United president Scott Kirby said during a first quarter earnings call on Friday. Any decisions, however, are a ways off as passenger numbers remain near zero with no imminent signs of recovery.
“Everything is on the table in terms of what we look like,” he said. “While we don’t have plans to close hubs, when you say everything is on the table we mean everything — there are no sacred cows.”
The subject of closing hubs is a touchy one. They require significant investments by airlines, both financially — in terms of facilities and staff — and socially, in terms of support from the local community.
For example, US Airways’ decision to downsize Pittsburgh (PIT) — once the heart of its route map — from a hub to a focus city in 2004 left the community with bitter feelings. Those lingered for at least a decade, with the local CBS affiliate in 2014 calling American Airlines’ decision to close the former US Airways flight operations center there a “bitter pill.”
Bitter pill or not, airlines have closed hubs after each of the past three industry crises. American shut hubs in Nashville (BNA), Raleigh/Durham (RDU) and San Jose, California (SJC), in the years after the 1990 recession; Delta Air Lines closed Dallas/Fort Worth (DFW) and Memphis (MEM) hubs following 9/11 and the Great Recession, respectively; and United closed its Cleveland (CLE) hub in 2014.
The COVID-19 crisis for airlines is worse than each of those past downturns, making it reasonable to anticipate of similar map changes.
“Some investors were disappointed when one of your competitors insisted that they’re wed to their current hub structure,” J.P. Morgan analyst Jamie Baker said during Friday’s call when asking if United might close a hub. “Look I get it, it’s a touchy subject — no one ever comes down and goes ‘yeah, we’re going to close Memphis.'”
The competitor Baker referred to is American. Speaking during the Fort Worth, Texas-based carrier’s own earnings call on April 30, senior vice president of strategy Vasu Raja said American had “no plans” to close any of its nine hubs following the crisis.
When asked for specifics on the post-coronavirus network plan, Raja said major connecting complexes like Charlotte (CLT) and Dallas/Fort Worth (DFW) will remain but further plans will be decided in a “clean-sheet exercise” that is just beginning.
Brett Snyder, founder of the travel service Cranky Concierge, thinks United’s Los Angeles (LAX) hub is the “most up for grabs” on its map. The airport, while located in the second-most populous metropolitan area in the U.S., is a center of airline competition. American, Delta and United all consider it a hub, and Alaska Airlines and Southwest Airlines maintain significant bases there.
“They’re going to go back to their basics, and then grow back,” he said on how airlines may rebuild the maps after the crisis at the beginning of April.
United is not committing to any long-term changes yet. Unlike other carriers, it will not make a decision on retiring jets until it has a better view of the recovery — a view it shares for any network shake-ups.
“When we emerge from this, United Airlines — and the airline industry — is going to look different,” said Kirby.
United Airlines is prepared for the possibility of a dramatic makeover once the coronavirus pandemic is past, including the possibility of cutting one of its eight hubs across the U.S.
None of the Chicago-based carrier’s hubs are “sacred” when it looks at rebuilding after the crisis, United president Scott Kirby said during a first quarter earnings call on Friday. Any decisions, however, are a ways off as passenger numbers remain near zero with no imminent signs of recovery.
“Everything is on the table in terms of what we look like,” he said. “While we don’t have plans to close hubs, when you say everything is on the table we mean everything — there are no sacred cows.”
The subject of closing hubs is a touchy one. They require significant investments by airlines, both financially — in terms of facilities and staff — and socially, in terms of support from the local community.
For example, US Airways’ decision to downsize Pittsburgh (PIT) — once the heart of its route map — from a hub to a focus city in 2004 left the community with bitter feelings. Those lingered for at least a decade, with the local CBS affiliate in 2014 calling American Airlines’ decision to close the former US Airways flight operations center there a “bitter pill.”
Bitter pill or not, airlines have closed hubs after each of the past three industry crises. American shut hubs in Nashville (BNA), Raleigh/Durham (RDU) and San Jose, California (SJC), in the years after the 1990 recession; Delta Air Lines closed Dallas/Fort Worth (DFW) and Memphis (MEM) hubs following 9/11 and the Great Recession, respectively; and United closed its Cleveland (CLE) hub in 2014.
The COVID-19 crisis for airlines is worse than each of those past downturns, making it reasonable to anticipate of similar map changes.
“Some investors were disappointed when one of your competitors insisted that they’re wed to their current hub structure,” J.P. Morgan analyst Jamie Baker said during Friday’s call when asking if United might close a hub. “Look I get it, it’s a touchy subject — no one ever comes down and goes ‘yeah, we’re going to close Memphis.'”
The competitor Baker referred to is American. Speaking during the Fort Worth, Texas-based carrier’s own earnings call on April 30, senior vice president of strategy Vasu Raja said American had “no plans” to close any of its nine hubs following the crisis.
When asked for specifics on the post-coronavirus network plan, Raja said major connecting complexes like Charlotte (CLT) and Dallas/Fort Worth (DFW) will remain but further plans will be decided in a “clean-sheet exercise” that is just beginning.
Brett Snyder, founder of the travel service Cranky Concierge, thinks United’s Los Angeles (LAX) hub is the “most up for grabs” on its map. The airport, while located in the second-most populous metropolitan area in the U.S., is a center of airline competition. American, Delta and United all consider it a hub, and Alaska Airlines and Southwest Airlines maintain significant bases there.
“They’re going to go back to their basics, and then grow back,” he said on how airlines may rebuild the maps after the crisis at the beginning of April.
United is not committing to any long-term changes yet. Unlike other carriers, it will not make a decision on retiring jets until it has a better view of the recovery — a view it shares for any network shake-ups.
“When we emerge from this, United Airlines — and the airline industry — is going to look different,” said Kirby.
