Jeff Smisek’s presentation yesterday at the 2011 Deutsche Bank Airline Equity Conference was a bit of a rehash of Sr. VP John Rainey’s presentation just last week, but he did speak to a couple of points I hadn’t heard before. First up, here are a few of those known items with the related slides (courtesy of United Airlines):
- Jeff highlighted that United has the world’s best network, leads the (domestic) competition in financial performance, is focused on return on invested capital (ROIC) and is either the number one or two carrier (in terms of available seat miles or ASMs) flying internationally from the U.S.
- As far as the capacity forecast for 2012, he’s claiming it will be flat overall by way of decreasing domestic (in part by adding Economy Plus to Continental’s fleet) and growing international (787 acquisitions and market-driven adjustments where appropriate).
- He highlighted the upcoming customer enhancements, namely refreshing the interiors of the Airbus fleet, adding Boeing 737-900ERs with the “Sky” interior, investing in better seats and completely overhauling the now tired premium service fleet that operates between JFK-SFO/LAX. For the last he reiterated the p.s. fleet would see Business flat-beds, Economy Plus and regular economy.
Now onto the newer items I hadn’t specifically heard yet this year:
- A portion of the compensation scheme for managers and above is dependent on the company’s ROIC and internal surveys from the work groups they manage. He specifically said 20% of their pay is based on the latter, but I’m sure it must be more of a bonus payout upon hitting certain scoring thresholds.
- The streaming Wi-Fi entertainment coming to the Boeing 747 fleet is an “experiment” using his words. I interpret that as in part to test its success before rolling it out fleetwide and otherwise since the 747 fleet is scheduled to be retired by 2016. It’s a good way to appease economy class with some sort of AVOD in the meantime. He also jokingly said, “When (passengers’) screens break, it’ll be their problem!”
- Sadly, his only comment about Mileage Plus was, “We’ll be announcing the new loyalty program shortly.” I’m hoping we’ll get the details by month-end.
- He acknowledged the slowness of the airport check-in kiosks today and claimed it was due to the strain the system is under toggling between Apollo (United) and Shares (Continental). Once the full transition to Shares is made (expected first quarter 2012) he promised faster processing. He hinted that ancillary sales might have taken a hit with the current sluggishness.
- During the Q&A he didn’t have specific percentage amounts when asked to breakdown the capacity forecast for 2012, leading me to believe they don’t really have a hard number domestic vs. international and said “flat” just to appease investors.
- When asked about the importance of fleet commonality he insisted United’s scale of operations could fully support a Boeing/Airbus mix and said it would remain so “for a very long time.”
- While he claims United’s 757s have many more years ahead of them, he did acknowledge the need to find a replacement and they’re in talks with Boeing and Airbus, as is the rest of the industry.
- Finally, a question was asked about the status of the European Union’s emissions trading scheme (ETS) where beginning January 1, 2012, all airlines flying to Europe will have to report their emissions of carbon dioxide and face fees if they go above specified caps. American, United and Continental have sued to avoid inclusion in this “tax,” as some are calling it, so this will be interesting to monitor. Are we going to see fuel surcharges and a new CO2 tax when flying to Europe next year?
If you’d like to view the slides and listen to the full presentation including the Q&A session, here’s the link to United’s Investor Relations.