There would be no prizes for having had former United Continental CEO Jeff Smisek at the top of your industry leaders in danger list for the past 24 months and in the end the board got the excuse it needed to see him off over the summer and this week the axe fell as a replacement was confirmed, but his replacement is a surprise to many. Oscar Munoz joins from CSX Corp and obviously it was a case of new minds fresh ideas for United’s board, but the problems at United are not simply limited to post-merger integration. The online system has been hacked more times than most and cyber security needs to be top of the agenda for the airline in the first instance. But the main problem United has by far is aircraft layout. For a decade now we have seen passengers become far more product aware, and at the same time choice for customers has exploded on most routes. As such United is left with brand new aircraft being delivered that customers are trying to avoid because the layout of the aircraft provides the smallest seat width of any major airline. In the premium cabins United is simply not up to the standard of the Middle East carriers or IAG, ANZ, Qantas, SIA, Korean and a swathe of other airlines. This means that more and more passengers are avoiding United every year and as they do their United Mileage Plus points lapse and with that the association many business passengers has had with the airline is lost. This process has been ongoing for a good five years now and to reverse this trend is going to involve serious cost both in product realignment and advertising the same. The only other option for United is to drop prices and become a low-cost, long-haul operation on routes where aircraft are delivered, that could well make the airline great again at speed and is the most logical move to take. Fresh minds fresh ideas – We shall see.
Meanwhile, Virgin America reports revenue passenger miles rose 1.5% to 954,000 in August but capacity rose 4% to 1.141bn available seat miles. As such August load factor fell to 83.6%, reversing the recent upward trend on a month on month basis. Is Virgin America now in danger of serious overcapacity concerns or will passenger traffic catch-up during September? This is something to watch out for without doubt.