Update 9/27 at 412p PT: In a true coincidence, I’m told that Brian is no longer with United as of today.
In August, I proclaimed that while Los Angeles was still a focus city for United, it was no longer a hub thanks to the way it was being scheduled. There was plenty of debate in the comments section, but why bother debating when you can go straight to the source? At the Boyd Conference in Tahoe last week, I sat down with Brian Znotins, VP of Network for United to talk about that and more. Today you’ll read about both LA and San Francisco with more to come in a later post on aircraft and new management. But first, let’s just get right to the point, shall we?
Odenwaelder: I want to start in LA, because I wrote a post a month or two ago…
Brian Znotins, VP Network for United: I saw that
Cranky: Ok, you saw it, so I was saying it’s not really a hub anymore; it’s focused on LA origin and destination traffic. That generated a whole ton of discussion about “is it, what is it, what isn’t it?” So… what is it?
Brian: Definitely a hub.
Cranky: Definitely a hub.
Brian: Absolutely a hub. I was a little surprised to see that.
Cranky: Can you expand on that?
Brian: We launch flights from there that do have a lot of connecting traffic, like Melbourne is very dependent upon connecting traffic.
Cranky: Melbourne, sure…
Brian: We’ve invested in the hub. We’re adding a second Heathrow trip in the summer that’s probably mostly local, but for us, you talk about flying a mainline airplane to Phoenix, the local market is not that great…
Cranky: You have mainline back in Phoenix again?
Brian: Yeah, yeah. [Ed note: I do not see mainline flying loaded in the schedules going forward, but I’m told it was there earlier this year?] And so you do need connections on that to make it work. So for us, it was actually a big surprise for me to see you write that article.
Cranky: Well, when you look at the schedules, a lot of the cities you have, you know, one in Albuquerque and one in Tucson and they come in at different times. And there don’t seem to be defined banks as much. It doesn’t look like a traditional hub.
Brian: I don’t think it can. Even Newark doesn’t have banks. It’s more of an infrastructure issue. We’re pretty gate-constrained in LA right now.
Cranky: Are you really gate-constrained?
Brian: Yeah, we’re investing $600 million in the terminal right now so that’s taking down gates. We don’t have the same kind of problems other carriers are having, but enough that we can’t really concentrate flights any more than we already are. Much like Newark, it doesn’t look like a bank structure, the same thing is true in LA. Even in San Francisco, you see some sign of banks, but the airspace constraints keep you from doing a lot of that too.
Cranky: There’s just a lot more volume in those other cities. You have more frequencies.
Brian: There’s no question we have invested more in San Francisco than we have in LA. Anytime we fly a San Francisco route and an LA route, the San Francisco route over-performs the LA route… higher share of business traffic, more schedule differentiation. We’re absolutely investing more in San Francisco than in LA but we’re not totally ignoring LA either. It’s just a tougher market. For us, LA is much less successful than San Francisco and we don’t have a strategic priority there to build an Asia-Pacific gateway, we’ve already got the best one. So if I’ve got a new long haul airplane to add, some will go to LA, but most will go to San Francisco.
Cranky: So what does the future of LA look like? You haven’t had much growth. I mean, some internationally. But you haven’t had much growth domestically. Of course all the short haul stuff has gone away, so what does the future look like in a few years?
Brian: One of the reasons the short-haul stuff went away is because [Embraer] Brasilias just aren’t an option. SkyWest basically called us and said “we can’t fly these airplanes for you anymore.” So markets like Carlsbad, where that’s the only option…
Cranky: Yeah, you have no choice there.
Brian: Yeah, then there are other markets where the economics of that airplane are the only thing that worked in the market. Other markets we converted to 50-seaters, and others we’ve pointed toward San Francisco and converted to 50-seaters. That was a lot of it. It wasn’t necessarily “de-hub LA.” And domestically there’s no question we haven’t focused on LA. We haven’t invested our growth there. We didn’t really grow as an airline from 2010 to 2014. We shrank overall, but in 2015, 2016 we started to grow again. LA has stabilized, especially taking out the JFK [flights]. Getting out of JFK was more about JFK than LA. Our p.s. service is doing great…. No question LA is a tough market, but we’re still committed to it.
Cranky: And everyone else is growing a lot.
Brian: You know, if I wanted a West Coast gateway and San Francisco was already taken, you can maybe think of LA as an option. I can see why some might want to give that a try.
Cranky: Now San Francisco, what you’re building there is pretty incredible. We were just helping someone the other day who had to go from Hangzhou to Austin.
Brian: Oh yeah, and hopefully…
Cranky: They did book on United.
Brian: That is fantastic. I’m so happy to hear that.
Cranky: But that’s the kind of thing you look at and say “Holy crap, how does this even exist today?” You’re reaching into some pretty deep places at this point. Is it all working?
Brian: It’s meeting expectations. We knew we were a little early. You know we were early into Beijing and Shanghai and those are just wonderful performers for us. They over-performed for so long that even the significant decline we’ve seen in the last three years still means they’re a good performer, just not the stratospheric good performer they used to be. These others are still developmental markets for us, and they’re at expectations. And they continue to grow.
Cranky: Do you want to keep trying more of these or are you in digestion mode right now?
Brian: So it depends how the market develops next year. We generally thought one route a year. This year the challenge we faced was we were trying to get slots in Shanghai for our second service, and we weren’t getting them. It took us like a year.
Cranky: Well, you got it.
Brian: But before we got it, we gave up, and said “OK, this isn’t likely to happen, let’s fly to Hangzhou instead.” So we actually took Hangzhou that was going to be a 2017 add and moved it forward. Then we got slots for Shanghai. So now we have that one we have to launch. We’re still looking at 2017, but we want to average about 1 a year.
So there you go. United still considers LA a hub, a smaller hub for sure and one that’s by far secondary to San Francisco, but a hub nonetheless. What do you think? Does this make sense to you?