United Blames Software Glitch for Profit Miss…Not the Hubs!

United Airlines this morning announced weaker than expected third-quarter earnings and sales as revenue rebounded slower than the execs had hoped.  CEO Jeff Smisek blamed the miss on a “software glitch” (not those September or October pricing glitches) causing a forecasting error. Smisek explained the problem and answered several reporter questions as to whether UA needs to rethink some of their hubs. Businessweek has the full story here.

“We are underperforming financially,” United Chief Executive Jeff Smisek said today on a conference call. “We know it, and we are fixing it.” The airline collected less money than its peers over the summer largely because of the demand forecast it was feeding into its revenue-management system. United’s chief revenue officer, Jim Compton, said the forecast was not properly accounting for the amount of tickets the airline could have sold closer to the day of travel, costlier fares typically bought by business travelers.

Smisek was then forced to answer several analysts questions as to whether weak hubs were to blame as well.

The company has more than a 70 percent market share in only one of its top four hubs, and less than 50 percent in two of them. In its Los Angeles hub, United commands less than one-fifth of the passenger traffic. Delta, by contrast, has seized more than a 70 percent share in all four of its largest hubs. Wolfe Research analyst Hunter Keay wrote in a Sept. 13 client note. “Perhaps hard decisions need to be considered about UAL’s commitment to cities like LAX (18 percent share), Denver (40 percent) and even Chicago (45 percent), which drive costs higher and might not be generating sufficient revenues … to continue to claim hub status.”

No mention of customer service issues, elite downgrades, or impossible upgrades even at the 1K level 😉

UA Toilet Paper

Comments

  1. the CEO always seem to have some excuse to avoid the obvious that he has alienated higher value flyers, who have voted with their feet.

  2. Perhaps Delta has >70% in it’s largest hubs, but not it’s most profitable. Market share does not necessarily mean profit.
    I can see dropping LAX has a hub and making it a focus city, but to suggest UA drop ORD is absolutely laughable.

  3. Maybe it’s just me but it’s funny how this mirrors the Obamacare rollout.

    Seriously I can see how a company could get hammered by it’s own IT issues. Also didn’t they have to pull the site down recently (during peak booking time) because of mistake fares. All this sort of stuff adds up I’m sure.

Leave a Reply

Your email address will not be published. Required fields are marked *