United CEO Oscar Munoz has a message about Washington Dulles: we screwed up.
Fly between Newark and Washington Dulles — United’s two east coast hubs — and you’ll find yourself on a 37-seat turboprop (Bombardier Q200). Admitting that United’s share of traffic has steadily shrunk on the WAS-NYC market while competitors have increased, Munoz conceded, “And so now you’ve lost that market.” Indeed, customers do not like regional jets and have voted with their feet. Not only because of the uncomfortable plane, but because these regional jet flights are the first to be delayed or cancelled during inclement weather or other irregular operations.
In a discussion with Dulles employees last month, Munoz conceded that regional jets on less profitable routes ultimately does not make sense. In a remarkable moment of candor, he admitted–
We fully understand that flying to business markets with subpar product and subpar schedules doesn’t work. There’s a reason why you don’t make money — because no one likes to fly it.
Munoz admitted that United considered shuttering its Washington Dulles hub, but decided that is the wrong thing to do “if you want to be a business that’s enduring.” A $50MN tax reduction (subsidy?) from the Commonwealth of Virginia also prodded United to sign a new lease that will run through 2024. Nevertheless, the “temporary” (since 1986) United terminals at Dulles remain and the airport requires at least $100MN in infrastructure improvements — probably more like $2BN. Munoz is angry about the “the train to nowhere” (great line), specifically that United has to pay $5 for every passenger that uses IAD for a train…that still requires a long walk from the Terminal C station to the United gates.
It pisses me off to no end, because it’s just money that could be used in so many different ways if we wanted to do the right thing here.
And of course, Munoz is right.
United Modifies Aircraft Orders
United recently modified its order for 65 737-700s, deferring 61 planes and taking delivery of just four larger Boeing 737-800s. The remaining orders may well be converted into a handful of wide-body jets or Boeing 737 Max. Munoz added–
It’s simply adjusting very expensive acquisitions to make sure they are are going to be with us for a long time, and we don’t wake up with a lot of aircraft five years or 10 years from now and somebody says, “What the hell did you buy these for?” These are assets that are with us for many, many years.
United is also in talks with Airbus to modify its order of 25 Airbus A350s. The A350-1000 has supposedly faced numerous setbacks and many at United still feel introducing an Airbus widebody jet would make little sense in complementing United’s 100% Boeing wide-body fleet.
Munoz and I share the sentiment about Washington Dulles. It is a strategic hub that United should not abandon. Nevertheless, there are so many things that make it unattractive. While I don’t necessarily see the long-awaited new terminal going up in my lifetime (in all seriousness), I do think using larger planes, especially for hub to hub traffic, will encourage more connectivity in Dulles and ultimately help to make Dulles a more profitable hub. Munoz is also spot-on concerning aircraft orders. The 737-700s are already outdated. United must think ahead of the curve if it is reclaim lost territory squandered in the Smisek era.
> Read More: United’s Dulles Dilemma