Yesterday, several airlines presented at the Bank of America Merrill Lynch Global Transportation Conference in Boston. Zane Rowe, Executive Vice President & CFO, and Gerry Laderman, Senior Vice President – Finance & Treasurer, spoke on behalf of United Airlines. Zane and I actually attended the same undergraduate university concurrently, Embry-Riddle Aeronautical University in Daytona Beach, FL, though I can’t claim to know him as he was a year ahead of me in coursework.
This presentation was again a fairly high level look at the state of business at United, sometimes identically matching recent presentations by CEO Jeff Smisek I summarized here and here. Below are my notes from yesterday’s event, with the bolded items particularly interesting to me:
- The person introducing Zane Rowe said, “United has great bones,” meaning the combined Continental and United network is superior with the best schedule out there.
- First up from Zane was categorizing the “Go Forward Plan.” While not revealing any details of it, he broke it out into Fly To Win (marketing), Fund the Future (financial), Make Reliability a Reality (operating), and Working Together (people).
- Again, mention of the unsurpassed scope and scale of United’s network drives revenue premium, especially since 35% of Fortune 500 companies, and 40% of Fortune 100 companies reside in or near their hub airports.
- United leads the industry in the key PRASM metric, which is passenger revenue per available seat mile, showing a 16.4% improvement in Q1 2011 year over year.
- Fuel, of course, was mentioned calling out the 25% increase in cost from the beginning of the year.
- United has done a better job mitigating the fuel increases with fare increases in both economy and first class, and “structural changes to fares where our revenue managers have built fences where appropriate.” I’d have to assume part of this statement is referring to routing rules being recently restricted to inhibit multiple connections in reaching a destination.
- United expects overall capacity changes to be flat for the year. Growth exists in international markets where appropriate.
- A number of ancillary revenue products are in the works, but he couldn’t (wouldn’t) talk about them.
- The merger is progressing, and he mentioned the streamlined travel announcement from a couple of days ago. Also, we should see a single reservations system by late 2012.
- Gerry spoke about their fuel hedging program, liquidity, debt and other high level financial data.
- Zane refused to comment on United’s distribution goals, specifically stemming from a question during Q&A asking about “Direct Connect” technology at the forefront of debate in the industry being spearheaded by American Airlines.
- Also during the Q&A, Zane pointed out that the corporate sales strategy is focused on getting the right deals & contracts, not necessarily those based on volume. Delta’s presentation discussed a 25% increase in corporate travel, which brought about the question.
- As for onboard amenities (Wi-Fi, live television, etc.), a very vague “we’re comparing notes between carriers and are at a good point to make decisions going forward taking into consideration what passengers are willing to pay for,” was provided as the answer.
- United is looking at all areas to cut costs where appropriate, mentioning there’s not one specific line item that jumps out at them. Zane did mention that they’re looking for efficiencies in rent, landing fees & maintenance.
- The Delta/Northwest merger saw hubs closing, and United reiterated that hubs have to earn a position in the combined network, and for now Cleveland is doing that.
- United is still in the early stages with the All Nippon Airways joint venture, and they’ve had good discussions so far in the areas of scheduling & pricing with ANA.
- Southwest Airlines is reportedly the #1 carrier in Denver now, but United is focused more on return on invested capital now than market share.
Presentations like these are typically high level as I mentioned, and while nothing new was revealed, I still enjoy listening to the webcasts to keep a pulse on what the executives are talking about. If you’re interested, here is a link to the presentation and slides from yesterday.