Expansion on existing routes—such as London to Denver, added a year ago—is less risky. “We served London from all of our hubs except Denver,” Quayle says. “So I know the prevailing fare.”
Gupta, 35, used the same process when deciding to add a daily flight from Bismarck to Chicago, which started last June. “We know that on Bismarck to Denver, we get these fares . . . and we know American flies it, so we have some historical data available there.”
The analysis then expands to include a range of financial, operational and other considerations.
“We look at profitability, passenger makeup, what kinds of destinations we can serve via Chicago, and what share will we cannibalize on our existing flights?” Gupta says. “You have opportunity cost: If you’re flying one route, you’re not flying another.”
Airport characteristics also come into play. Gate availability constraints and aircraft movement restrictions limit options in places like San Francisco, Los Angeles and Newark, while midcontinent hubs allow more flexibility, Gupta says.
Over the past two years, United added 28 routes from Chicago, where it operates about 650 flights a day, its busiest airport.
“We have to determine whether adding frequency (to an existing route) or adding a new market is better,” Gupta says. “That’s where strategy comes in: What are we trying to do in Houston, Chicago and Denver?”
Even if all other factors line up, United can’t add a destination unless it has enough of the right kind of planes available to serve the route. “The plane has to be the right size and in the right location,” Gupta says.
The decision to start a route today can be dictated by what aircraft was ordered several years ago. When United wanted to launch a route between San Francisco and Tahiti, it needed a Boeing 787-8. One became available when United took delivery of a larger 787-9 that replaced the 787-8 it was using on an existing route.
“A new 787-9 comes in, and it can fly Munich to San Francisco—that frees up the older 787-8, and we can start a new route,” Quayle says.
Having the right plane doesn’t always mean you can fly it where you want to go. To add Houston to Sydney, one of the longest nonstop flights in the world at nearly 8,600 miles, much of it over water, United needed special government certification to fly on one engine for up to 240 minutes in case of emergency, nearly double the industry standard.
Other routes might require permission from countries such as Russia or China to fly over their territory. “We work with our government affairs team, who coordinates with FAA, DOT and the State Department,” Quayle says.
NETWORK RULES
Eventually, it comes back to the map.
“The network drives almost everything—gates, access to facilities, de-icing equipment and manpower,” Gupta says. “We need pilots, flight attendants and technicians, or we can’t fly.”
The network matters in another crucial way. When United added a flight from Los Angeles to Missoula, Mont., last year, planners also were looking at its Denver hub, which United already serves from Missoula. United figured that enough L.A. passengers bound for Denver would be willing to connect through Missoula in return for a lower fare than they would pay for nonstop service. From Denver, United can fly passengers on to 60 other domestic destinations. Therefore, route planners estimated the L.A.-Missoula flight would be 80 percent full, making it profitable.
“It’s kind of mind-boggling,” Gupta says. “When we look at it, it’s about combining the fares: How much does it cost us to fly that passenger? It’s not just how much is it to fly that segment?”
With all those variables, planners look at far more routes than they can add.
“For every route we announce, we’re analyzing 10 or 20 routes behind it,” Quayle says, declining to name the also-rans. “Maybe we didn’t think the market was big enough, or we didn’t have the right aircraft or the slots for arrival or departure.”
Still, it doesn’t always work. United canceled service from O’Hare to Champaign after a year because demand didn’t meet expectations. United dropped a Los Angeles-to-Singapore flight just as quickly. “We were going to be the only carrier flying nonstop from L.A. to Singapore,” Quayle recalls. “It was a great idea: The market was huge, it was a premium market.”
It also was crowded with Asian carriers flying much larger planes on connecting routes. “They can discount like crazy and charge $200 round-trip. We didn’t think they’d do what they did.”
United replaced the route with a second flight from San Francisco to Singapore. “These are $150 million to $200 million planes, so you can’t be wrong too often,” Quayle says. “If you’re wrong a lot, you’re not going to be in this job too long.”