United Airlines Uses The Crisis To Diversify Latin American Network
Latin America has been a strong performer through the recovery. With the big three US airlines and smaller…
Latin America has been a strong performer through the recovery. With the big three US airlines and smaller peers heavily contesting the geography, passengers have no dearth of options when it comes to choosing a flight itinerary. Sensing an opportunity, United Airlines has used the crisis to diversify its Latin America network.
United has diversified its Latin America network
Speaking on the airline’s first-quarter earnings call, Andrew Nocelle, Chief Commercial Officer at United, discussed the carrier’s international network. While long-haul demand has been largely depressed, Latin America has proven strong for the airline, as he stated:
“As we look forward to our capacity levels in most parts in near-Latin America are now above 2019 levels. Wherever we look in Latin America or Europe, where access is permitted, we see leisure demand in 2019 levels or greater.
One bright performer has been Mexico. Mr. Nocelle stated that, after the US announced it would institute a mandatory testing requirement for inbound international travelers, United feared a drop in travel demand for Mexico. So, the carrier cut capacity, expecting the reduction. However, the airline was wrong and had to go back and add capacity to the market again.
Latin America is also a realm of new opportunities for United. Mr. Nocella discussed how the airline was responding to travel demand for Latin America:
“This summer, we’re planning to be at our 2019 levels already and there’s very few parts of our airline where we’re at that level. We have a great Latin American franchise. However, it’s been historically very Houston-centric and we’ve taken the opportunity in the recent months and going forward to diversify that portfolio to now include more out of Los Angeles, Washington and New York and our intention is to keep that.”
United’s Latin America expansion
This month, United is operating more flights to Mexico, the Caribbean, Central America, and South America than it did in May of 2019. Much of this came from both resumptions in existing Latin American routes and new additions to the carrier’s route network.
This includes a significant expansion from hubs like Denver, Los Angeles, and San San Francisco to points in Central America, such as Belize and Costa Rica. Washington D.C. received additional service to the Caribbean, as did Newark, which United uses as its New York City gateway.
United has also brought back much of its long-haul international flying. This includes returning flights to Sao Paulo, Rio de Janeiro, and Santiago, among other cities. Note that not all of those flights are operating with the same pre-crisis frequencies.
Improving Latin American revenue
In the first quarter of 2021, United took in $392 million in revenue from Latin America, as defined by the US Department of Transportation (DOT). Delta took in $381 million, while American Airlines received $482 million in revenue from Latin America.
In the first quarter of 2019, United took in $975 million in revenue from Latin America. Delta received $964 million in revenue from the region. American Airlines, historically a powerful player in Latin America, took in a whopping $1.4 billion in revenue from Latin America.
Now that Delta Air Lines has a partnership with LATAM, that airline will be a much larger force to contend with in Latin America. With partners in Copa, Azul, and Avianca, United has also been a growing force in the region. However, it has maintained a relatively limited network there, funneling most passengers through Houston.
American has a robust Latin American network, with flights running to several countries out of Dallas and Miami. After rebuilding its network and gaining new partnerships, other hubs like New York and Charlotte are also seeing increased services to points south of the US.
All of this indicates that United believes it needs to diversify to compete more effectively. Much of the added new routes out of other hubs like Denver, Los Angeles, Washington D.C., and Newark are short- and medium-haul flights to points in Central America and the Caribbean. Many countries in these regions have been open for Americans since mid-to-late 2020, which is why United has pointed more of its planes there.
Ultimately, diversifying its hub network to Latin America means more itineraries that the airline can offer and compete against its network peers in the region whether all of these new routes are still around when Europe, Australia, and Asia open up remains to be seen.
Do you think United made the right choice in diversifying its Latin American route network? Let us know in the comments!