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UAL - JFK/HKG service lasts just 5 months

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UAL - JFK/HKG service lasts just 5 months

Old 27th Jun 2001, 12:30
  #1 (permalink)  
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Unhappy UAL - JFK/HKG service lasts just 5 months

United Airlines Corp said on Wednesday it is ending its Hong Kong-New York service from August 30, blaming weak demand and regulatory issues.

"The non-stop HKG-JFK flight has been discontinued due to poor booking levels. The company does not anticipate improvement, which is why this step has been taken," the company said in a faxed response to Reuters questions.

The service was launched on April 1.

The last flight would operate on August 30, two days before Hong Kong carrier Cathay Pacific Airways Ltd launches its new Hong Kong-New York service on September 1.

United said regulatory problems in Hong Kong prevented United from working with alliance partners and from continuing flights beyond Hong Kong to other Asian destinations, contributing to the poor performance of the Hong Kong-New York route.

"United is unable to engage in third country code-sharing and to operate liberal fifth freedom rights," it said. So-called fifth freedom rights allow an airline to extend flights beyond its original destination country.

These restrictions, combined with a significant decline in the economic climate, had made the service unsustainable, it said. Service to New York would continue through its other gateways: Chicago, San Francisco, Los Angeles and Tokyo.

Cathay shrugged off the news that United had found it difficult to make the route pay. It said it was still "very committed" to the new service, which complements an existing daily Hong Kong-Vancouver-New York service.

"This is going to be a popular service," a Cathay spokeswoman said, declining to comment directly on United's decision to stop its service just before Cathay launched its new service.

Cathay said last month the new non-stop service would operate over the North Polar region, saving more than two hours flight time each way, and would be operated with an Airbus Industrie A340-300 aircraft, which can carry 193 passengers.

The only other airline operating a direct Hong Kong-New York service is Continental Airlines. Continental launched its service in early March."
Old 27th Jun 2001, 17:49
  #2 (permalink)  
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Interesting - I happened to be on this airplane HKG-JFK last week - was lucky enough to get the last available seat in business class 24 hours before departure.

F and Y cabins were full as well - perhaps the 'weak demand' is in the opposite direction.

I did note that we did not fly the polar route mentioned, instead flying a random track across NOPAC to SEA direct JFK - 15+30 total time.

This was a convenient flight - sorry to see it go - off to Cathay or Continental next time, I suppose.

Thanks to all.

Old 27th Jun 2001, 18:20
  #3 (permalink)  
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Asian aircarriers have a distinct advantage with marketing these very long-range services to their countries. Suspect that CX will find the necessary pax to keep the service going. Their hosties are better looking as well.
Old 27th Jun 2001, 19:10
  #4 (permalink)  
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Uniteed never sticks at a route very long, if the numbers scare them. They have also been quite poor at marketing new routes.

Dulles to Glasgow
Dulles to Madrid
Dulles to Zurich
Miami to Lima
Miami to MEX

etc. etc.

Also, the company wanted to switch to a 777 this fall on the route, but that would have shut the 747-400 base down in New York. The pilots do not want that to happen obviously.

This latest is really about the viability of the 747-400 in ultra long routes, versus the 777 (or A340).
Old 27th Jun 2001, 19:42
  #5 (permalink)  
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Shutting down the 744 base at JFK is a done deal.

Weekend flights to and from asia are ususally full. Flights on Monday, Tuesday and Wednesday usually have the lightest load, summer excluded.
Old 27th Jun 2001, 19:50
  #6 (permalink)  
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Three factors should also be considered as contributory:
- COA has established a very good reputation for itself in recent years; UAL's reputation has been declining - . Also, it's not helped by the fact that Y class on UA's 744s do not have PTVs; CO's 777s do.
- Cathay is about to enter the route; while it's currently operating via YVR, it's a far superior airline service wise and a nonstop service would blow UA out of the water. Best to cut losses early?
- Newark is closer to NYC and COA has a very well established hub there; UA hasn't much traffic to feed from.
Old 28th Jun 2001, 00:18
  #7 (permalink)  
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Sadly United is in a bigger mess than ever. Goodwin has nothing at all positive to show for his two years in the seat - except the UAL pilots got a fair contract last year. The stock is appallingly low; we are embarked on competing with Warren Buffett on Biz Jets, and we are on a road to disaster with Useless Air. They will self distruct shortly anyway. Everyone in the industry inside and outside United think he is a goon. When will the BOD replace him?

The 747-400's are now the big bargaining chip with the pilots. They pay huge bucks compared to any other equipment on the property. United wants out of 4 engined planes, as does Boeing.

The majority of pax couldn't give a stuff what they fly on as long as it is cheap and they arrive alive; we don't make money with coach pax, we pay the rent on the equipement with the advanced purchase fares; the biz and first tickets plus cargo are the serious money spinners. Interestingly the 400 goes out of JFK most days at MTOG - ergo no more seats to fill anyway, but lots of nice cargo down below. As mentioned, the 777 has better IFE in steerage. United could have changed that on the 400 if they planned to keep them.

Dark times ahead.

[This message has been edited by Oilhead (edited 27 June 2001).]
Old 28th Jun 2001, 00:28
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Here is an interesting piece from July's Forbes magazine...

United Comes Untied

Caught between unions and customers, Jim Goodwin hasn't made his task any easier
What's the worst job in American business? Running UAL Corp., parent of United Airlines. James E. Goodwin, 57, got the lofty position two years ago. He probably wishes he had turned down the promotion.

Look at all the enemies Goodwin has made. Customers are still seething over last year's slowdown by United (nyse: UAL - news - people) pilots, which resulted in 23,700 flight cancelations. Caving in to the pilots, Goodwin jacked up labor costs in the last four quarters by $900 million, or 14%, and now 44,000 mechanics and 26,000 flight attendants are angrily waiting for comparable raises. Stockholders hate him for letting UAL shares sink from $62 a year ago to $33 recently. Bond-rating agencies are fretting about Goodwin's attempt to purchase USAirways Group (nyse: U - news - people); if the acquisition happens, UAL will have a monstrous $28 billion in debt (including off-balance-sheet airplane leases) perched atop $6.2 billion in equity. The merger would likely raise UAL's borrowing costs--scary when you consider that total debt service would amount to $2.5 billion a year.

Surely United's competitors are happy with this state of affairs? Unfortunately, Goodwin doesn't even have any admirers there. "United has everyone else in the industry mad at it because of that [pilot] contract," says Aaron Gellman, former director of the transportation center at Northwestern University.

Until it was recently upstaged by AMR's purchase of TWA, United, with $19.3 billion in revenues last year, was the largest airline in the world. It is also one of the most troubled. In our recent airline survey (FORBES, June 11) United ranked dead last among big carriers in punctuality, with 40% of its flights last year failing to arrive on time. That United ranked first in cabin comfort doesn't make up for this failing with the crucial business-traveler clientele, who account for 55% of United's revenues.

A 34-year veteran at the airline, Goodwin was supposed to settle labor problems after Gerald Greenwald's handpicked successor was driven off by United's fractious unions. But Goodwin was destined for trouble. Union members raised their equity stake in UAL to 46% in return for wage concessions in 1994. Those concessions have added up to a cumulative $4.9 billion. Last year, with the economy humming, the pilots figured it was time for a payback, and they did not look at their faltering shares of stock as restitution. By the time they had wrestled Goodwin to the floor, a senior 747 captain was making $291,000 a year.

Could Goodwin have fought back harder? Maybe--if he had been willing to take a strike and shut down the enterprise. A stronger leader could have convinced his restive troops to hang tight a bit longer on those concessions, since boosting the stock price is in everyone's interest. As it was, the pilot slowdown cost the company $500 million in revenue and an immeasurable amount in goodwill.

As 2000 drew to a close, United's operating expenses per seat-mile (including airplane depreciation) had ballooned 12.8% from the previous year to 10.6 cents. Operating revenue was up only 7.8% to 11 cents per seat-mile. This year costs are higher and passenger volume will probably be down. (It was off 3.3% in April and 1.4% in May from year-earlier levels.) James M. Higgins, a transportation analyst at csfb, predicts that United will post its biggest loss ever this year--$460 million.

What's Goodwin's answer to all this ill will? He's decided to compete with Warren Buffett by getting into the corporate jet time-share business--200 aircraft within five years. That makes about as much sense as, say, a California utility getting into the backup generator business.

But perhaps the dumbest move of all is his play for US Airways. Taking on that troubled carrier (2000 revenue: $9.3 billion) would only make matters worse. ual pilots fear they could lose their perks of seniority--affecting pay, the planes and routes they fly, pensions and days off. The machinists have threatened to block the merger unless they're guaranteed job protection. And the flight attendants claim that the merger would violate their contract with UAL.

US Airways is a chronic moneyloser saddled with high-cost union contracts, expensive gate leases and the threat of low-fare competition from Southwest Airlines (nyse: LUV - news - people). United would have a hard time trimming costs and, by its own estimates, have to spend four years integrating the two sets of labor contracts, computer systems and routes. The purchase would come with expensive hubs in Pittsburgh and Charlotte that overlap United's hubs in Chicago and Washington-Dulles.

Goodwin originally agreed to pay $4.3 billion in cash for US Airways, the equivalent of $60 a share, plus the assumption of $7.3 billion in debt. US Airways was then trading at $26 and has since slipped to $24. At almost any price, though, the acquisition would be no bargain.

"This is like merging a Ford and a Studebaker," says airline consultant Michael Boyd.

The U.S. Justice Department is holding up approval of the acquisition while it ponders what the deal would do to the concentration of gate ownership, and fares, in smaller cities. Here's one enemy of United that might be a friend in disguise. If Justice kiboshes the merger--or, barring its decision by Aug. 1, if either side walks away from the deal--UAL shares would probably rise.

Even that happy event might not be enough to save Goodwin's neck. Some money managers believe that come fall, he may get the boot.

Old 28th Jun 2001, 01:28
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Suspect that the B747-400 will disappear from the UAL stable within three to four years, replaced by the B777. Boeing is on a roll with this aircraft, and it will surely replace the B747-400 with many aircarriers. 'Tis one fine machine, everything the AirBus equipment is....not.
Old 28th Jun 2001, 16:08
  #10 (permalink)  
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Ah yes 411A, and you are current and therefore knowledgeable on which Airbus aircraft?
Old 28th Jun 2001, 16:12
  #11 (permalink)  
Haulin' Trash
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411A - Tristars are a little different from the current crop of Airbuses methinks!
Old 28th Jun 2001, 19:47
  #12 (permalink)  
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It's not the 74 that has ETOPS problems in Singapore....
Old 29th Jun 2001, 06:12
  #13 (permalink)  
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Annother wise post by 411a, should have taken up that career as a pilot instead of going to work at the bank, eh?
Old 1st Jul 2001, 01:49
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Checking the published schedules, the A-340 takes 17:40 to complete the trip. The 744 and 777 are 15:40 - NY to HK. I don't care how skanky the F/As are. It's not worth 2 hours to take the slowbus.
Old 1st Jul 2001, 04:46
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17.40 by 'bus? Interesting. Certainly at UAL we don't have any contract language or crewing arangements to fly "sked" past 16 hours. We kind of fall off the edge of the world once we get past 16 hours.

Listened to a Boeing guy the other day, talking about how the Sonic Cruiser will fly LHR - SYD non-stop. If that really were to be the case, I imagine it would be up around 19 or 20 hours, if they stay subsonic.

Those King Size crew beds had better have gooood mattresses!
Old 1st Jul 2001, 06:00
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>>17.40 by 'bus? Interesting. Certainly at UAL we don't have any contract language or crewing arangements to fly "sked" past 16 hours. We kind of fall off the edge of the world once we get past 16 hours.<<

Contractual rest limitations are a novel concept at most carriers outside the U.S., as are duty and trip rigs. We are far ahead in quality of life issues as well as pay and they are just now starting to awake and attempt to emulate our gains. When you talk of an augmented 747-400 crew after eight hours flight time most international carriers would think you were joking (and that's FAR's, UAL's contract is even better).

Boeing is attempting to take the -400's in on trade and covert them to freighters ala the MD-911's from what I read in Aviation Week.

[This message has been edited by Airbubba (edited 02 July 2001).]
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