United Airlines outlines plan to quadruple profits

United Airlines outlines plan to quadruple profits

US carrier aims to reduce costs and drive more ancillary revenue

US carrier aims to reduce costs and drive more ancillary revenue

United is planning to overhaul its trans-Pacific and trans-Atlantic operations
United is planning to overhaul its trans-Pacific and trans-Atlantic operations

United Airlines has unveiled a major new strategy designed to help it multiply its profits as much as four-fold over the next four years.

The US-based carrier is aiming to cut its expense bill by US$2 billion per year and generate an extra US$700 million in ancillary revenues by 2017.

“We are working together to build on United’s core strengths and deliver excellent long-term results for our investors,” said Jeff Smisek, United’s chairman, president & CEO. “We are committed to achieving sufficient and sustainable profitability that will benefit all of our stakeholders.”

The majority of the expected gains will be driven by cost-savings, with United vowing to reduce fuel consumption and sourcing costs, improve maintenance processes and optimise its distribution methods.

The airline is also planning to drive more ancillary revenue, by expanding its range of products, optmising pricing on existing services, and expanding the sale of ancillary products through more distribution channels. Through these methods, the airline expects to generate more than US$3.5 billion in ancillary revenues by 2017.

Overall, United said it “aims to increase pre-tax earnings by two to four times the current level over the next four years”.

In terms of operations, United said it wants to expand its trans-Pacific and trans-Atlantic joint ventures with ANA and Lufthansa respectively. This will include the launch of a second daily Houston-Tokyo service, but the cessation of its Seattle-Tokyo and Tokyo-Bangkok services, as it takes greater advantage of ANA’s intra-Asian network. It also plans to reduce capacity on its Tokyo-Seoul route.

As previously announced, United will also launch new trans-Pacific services connecting San Francisco with Chengdu and Taipei.

In terms of the trans-Atlantic market, United will launch a new service from Houston to Munich and seasonal operations on the Washington DC-Madrid and Chicago-Edinburgh routes. It will also add more seat capacity on its Newark-London Heathrow route during the summer peak season.

Finally, United is planning to enhance its e-commerce strategy, with new mobile apps and extra direct distribution through digital channels.
United suffered a pre-tax loss of US$724m in 2012, but has recovered strongly in this year, posting a pre-tax profit of US$427m for the first three quarters of 2013.

Mark Elliott
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Mark Elliott
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