United operates 400 services a week to, from, and within Asia-Pacific and the US

Whether these are the best of times or the worst of times in the airline business may depend on where you happen to be. Airlines in the United States, several of which have only recently emerged from bankruptcy protection, were desperately in need of newer, more efficient fleets but had little cash to fund them and not much hope of a market for their older aircraft. The oil price shock of the past year brought a solution: park old aircraft in the desert “boneyards” where they don’t deteriorate, and – in the case of Delta and Northwest – decide to merge.

The result in the US has been, according to American Airlines official Beverly Goulet, that the equivalent of one very large airline has been removed from the US marketplace. That has turned out to be the right solution for the wrong reason; fuel prices have fallen dramatically, but the world’s financial crisis is also causing a fall in demand, so the cutbacks have coincidentally come at the right time.

Conversely, Hong Kong’s Cathay Pacific Airways is in the process of parking some freighters, cutting back on services, trying to dispose of some older aircraft, seeking to delay deliveries of aircraft on order and asking staff to take voluntary unpaid leave. On both sides of the Pacific the outlook is gloomy on an individual basis for staff, with major retrenchments in the US, though it should be acknowledged that Cathay and other non-US carriers do not have track records of using staff numbers as an economic safety valve.

However, unlike their Asian counterparts, the major US carriers now seem to be brimming with confidence about their prospects of making profits in 2009. Having gone through their economic travails earlier than their Asian counterparts, they are set to enjoy the benefits of cuts in fuel prices that may – they hope – compensate for the fall in demand.

One such airline is the giant United Airlines, which has rejigged its management of its China routes to include Hong Kong in a “Greater China” assemblage of routes between China in general and the US mainland. It is parking 100 of its former fleet of 455 aircraft (94 of the parked units are short-range 737s from domestic US routes, but six are Boeing 747-400 jumbos) and cutting its 55,000 staff by around 1,600.

Having done that, United (headquartered in Chicago) is still operating from five hubs in the US and continues to operate seven flights a day to Beijing, Shanghai and Hong Kong: three a day to Beijing from Washington, Chicago and San Francisco; two a day to Shanghai from Chicago and San Francisco, and two a day to Hong Kong from Chicago and San Francisco. Direct flights between Hong Kong and Los Angeles were dropped at the end of August because of falling demand, but, says United’s Director, Greater China, Sydney Kwok, if or when demand picks up again, this route could be reinstated.

Hong Kong-born Kwok has been with United since 1998, and was appointed general manager, China in 2000. Now he has to run operations from Hong Kong as well as Beijing and Shanghai, and may have to take on Guangzhou as well – United has the necessary traffic rights to fly there direct from the US, but Kwok says the economics of that route are not yet good enough.

In the meantime, he has plenty to occupy his days. United is a partner in the Star Alliance grouping of airlines, which includes Air China and Shanghai Airlines, and apart from code-sharing with each other’s flights and mileage rewards, the alliance members expect to share ground facilities in new terminals in Beijing and Shanghai,  bringing greater efficiencies and economies of scale.

Just how big United is within Asia can be judged from the fact that it operates about 400 services a week to, from and within the Asia-Pacific region and the US, with 13 destinations in the Asia-Pacific. Says Kwok: “The Asia-Pacific region is an important part of United’s global strategy and mainland China and Hong Kong are two key markets within the region. Further, Hong Kong is United’s third biggest operation in the Asia-Pacific region after Japan and Mainland China in terms of flight movements/flight volumes (departure and arrivals).”

The links between Chinese families in California and southern China have made Hong Kong vitally important as a United destination for many years, but even more so now, he says. “Hong Kong will no doubt continue to be one of United’s key markets in Asia. Hong Kong retains its importance as a gateway to Southern China and benefits from the growth in trade in the Pearl River Delta. United will therefore continue to invest in Hong Kong.” There is, he hopes, much business to come from the Pearl River Delta as a whole.

Investing in a new United Red Carpet Club in Hong Kong for first and business class passengers is one direct example of such investment; another, less direct, is the introduction of seats that recline to become fully flat beds in first and business class sections on aircraft used between Hong Kong and San Francisco and Hong Kong-Singapore. The seats will be introduced eventually to all United’s international services.

However, one sign of the economic times in the US is charges for check-in baggage – still free on services to and from Asia. But, alas, and contrary to what its Asian competitors are doing, since August United has joined the ranks of other US carriers and has been charging for alcoholic drinks in economy class on Asia-Pacific flights.  Financial constraints obviously limit how generous an airline can be, but Kwok promises that United will continue to listen to what its customers say – United has been a consistent winner of awards for customer relations and service – and will respond positively when it is able to do so.