Table of Contents
Introduction
United Airlines is placing a significant bet on the future of long-haul, international flying as a means to drive growth and profits in the coming decade. Despite concerns about the sustainability of the international travel boom, United’s Chief Commercial Officer, Andrew Nocella, believes there is still ample opportunity for expansion in this sector. With a robust summer 2024 schedule and orders for hundreds of new Boeing 787s, United is positioning itself to capitalize on the potential for growth in the international market.
The Potential for Growth in International Travel
Nocella asserts that as the United States approaches the end of this decade, its growth will be closely tied to GDP. However, he believes that there is much more opportunity for growth overseas. United Airlines saw record profits on both transatlantic and transpacific routes in the third quarter, with international yields showing a significant increase compared to systemwide yields. Despite concerns about a potential downturn in transatlantic flights due to increased industry capacity, Nocella remains optimistic about the future of long-haul international routes.
Balancing Investment and Profitability
Expanding into long-haul international routes requires significant investment, particularly in acquiring new aircraft like the Boeing 787s. While the potential payoffs can be substantial, so too can the losses. Nocella addresses this concern by highlighting United’s commitment to ensuring that new routes turn a profit within their second year of operation. The airline does not engage in “strategic flying,” where routes are operated with the expectation of future profitability. Instead, United seeks routes that are likely to be profitable from the outset. Although some new routes, such as those to Bergen, Norway, and Berlin, were dropped after a single season, United remains open to exploring new, potentially untested markets if they show promise for profitability.
United’s Strategic Positioning
United Airlines is uniquely positioned to capitalize on opportunities in smaller international markets due to its extensive network of hubs. Newark and Washington Dulles serve as gateways to Europe, the Middle East, and Africa, while Houston connects to Latin America, and San Francisco serves as a hub for Asia and Australia. United’s upcoming acquisition of 50 Airbus A321XLRs in 2025 will further enhance its capabilities in reaching smaller markets in Europe from Newark and Washington, replacing older Boeing 757s and opening up new opportunities for growth.
Conclusion
Despite concerns about the sustainability of the international travel boom, United Airlines remains confident in the potential for growth in long-haul international routes. With a focus on profitability and strategic positioning, the airline is investing in new aircraft and expanding its summer 2024 schedule to capitalize on the opportunities in the international market. By doubling down on long-haul international travel, United aims to drive growth and turn profits in the coming decade.
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