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…

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 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 Airlines has used returning demand for travel to Latin America to diversify its route network, adding new nonstops from its coastal gateways. Photo: Vincenzo Pace | Simple Flying

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.

United has seen travel demand come back sharply for points in near-field Latin America. Photo: Getty Images

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 LaGuardia Getty
Much of United’s expansion focused on short- and medium-haul flying. Photo: Getty Images

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.

United Boeing 787-9
United has also brought back many long-haul routes to Latin America. Photo: Vincenzo Pace | Simple Flying

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.

United Boeing 777-300ER
United is looking to diversify its network to better compete against other airlines. Photo: Vincenzo Pace | Simple Flying

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!

Source : Simple Flying More   

What's Your Reaction?

like
0
dislike
0
love
0
funny
0
angry
0
sad
0
wow
0

Next Article

Allegiant Air Is Not Concerned About Breeze Airways

Highly-anticipated startup Breeze Airways has revealed few details about its anticipated operations. However, when it finally launches operations,…

Allegiant Air Is Not Concerned About Breeze Airways

Highly-anticipated startup Breeze Airways has revealed few details about its anticipated operations. However, when it finally launches operations, Allegiant Air’s executives are not concerned about the added competition from the carrier. Instead, the airline is focused on its expansion plans and emboldened by a strong balance sheet.

Allegiant is not concerned about the impending entry of Breeze Airways in the marketplace. Photo: Vincenzo Pace | Simple Flying

Allegiant Air is not worried about the competition

On Allegiant’s first-quarter earnings call, CEO Maurice Gallagher was asked about the growth of low-cost competition in the US. In his comments, he specifically spoke about Breeze Airways:

“While we’re certainly going to pay attention to people, that’s not [the] first thing we look at this point in time. With the Breeze side of the house, they have an ambitious growth schedule, but with their airplane size and some things, I’m not terribly concerned about flying against a 110-seat airplane, which they’ll start with. The A220 is a good airplane, but they claim to be interested in longer-haul thinner markets. So, we’ll just have to wait and see.”

John Redmon, President of Allegiant, followed up with his own thoughts on branding:

“I think when you look at it, we’ve never been afraid of competition. But, financially, where we stood some time ago versus where we stand now, Maury stated in his comments, we all kind of alluded to it, but we’ve never been stronger with a stronger balance sheet in history of the company, frankly. So we’re well-positioned to take on anyone. When you look at the start-ups, they – literally – don’t have a brand. No one knows that brand in the marketplace. So, they’re coming in as a brand that no one’s ever heard of, and as Maury points out, maybe with a plane type that’s not as cost effective as ours in some cases. So, I think we’re very comfortable with where we stand, going forward.”

Allegiant
Allegiant Air is planning another capacity increase this summer, which is when Breeze is targeting a launch. Photo: Getty Images

Breeze Airways versus Allegiant

Breeze Airways is the brainchild of David Neeleman, who is best known for setting up JetBlue. The airline plans to fly point-to-point using Embraer E190/E195s to start and then move toward the Airbus A220-300.

Breeze is looking at a plethora of routes and markets. It wants to focus on point-to-point, low-cost travel between secondary cities. Allegiant also flies a similar model, with a focus on connecting leisure passengers. As an ultra-low-cost carrier, Allegiant has focused on offering a no-frills product and selling ancillaries to its customers.

Breeze Airways has yet to detail its full model and slate of offerings. While it wants to be low-cost, that model comes in many different varieties.

Breeze Airwyas
Many of Breeze Airways’ planned summer routes have no nonstop competition. Photo: Breeze Airways

Allegiant and Breeze likely will not compete too much. According to Mr. Neeleman, 80% of Breeze’s routes will have no competition this summer. Of course, those routes have yet to be revealed, and plenty of airlines have made new route announcements since his statement.

Allegiant is focused on its low-frequency, low-utilization model that has helped it be successful. It sees plans to grow and is stepping on the gas in 2021 as most of the larger airlines in the US focus on repairing their balance sheets, rebuilding their schedules, and reactivating their aircraft.

Allegiant Airbus A319
Allegiant’s smallest aircraft is the Airbus A319, which seats 156 passengers. Photo: Vincenzo Pace | Simple Flying

The interesting play in the market

Mr. Gallagher’s airline is in a great place and has big plans moving forward. For him, the more interesting play is the big three US airlines, as he stated:

“I think the really interesting play is how do the Big Three react […] they’ve got a ton of debt. Their cost structure is twice what any of ours are. I just don’t know how those guys kind of come down the hill – not to say they won’t – but long term.”

He went even further, stating:

“I think you’re going to see the ULCC side able to really gain a lot of market share, potentially, over the next couple years. And that’s what we are so bullish on because we can really stand alone in what we do and how we’ve done it.”

Allegiant Getty
Allegiant Air is is expecting a fantastic 2021 and is planning more growth with used aircraft acquisitions. Photo: Getty Images

The big three in the US refer to American, Delta, and United. The three major network airlines have all taken on new debt since the crisis started to shore up liquidity, and they have a lot of work to do.

Allegiant does not traditionally compete heavily with these three airlines. However, as all airlines are mainly oriented toward capturing leisure travelers, there is more and more overlap between the airlines. Allegiant has so far held its own, and it believes it can hold its own moving forward.

Whether it be Breeze Airways or the big three US airlines, Allegiant Air is ready to face the competition, and it believes it will win.

What do you make of Allegiant’s view toward Breeze Airways and the big three US airlines? Do you think Breeze Airways is a threat to Allegiant? Let us know in the comments!

Source : Simple Flying More   

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.