Skift Take
United is betting a lot of money that costly long-haul, international flying is the place to grow and turn profits this decade.
United Airlines Chief Commercial Officer Andrew Nocella does not think the international travel boom has run its course. Far from it.
Instead, the Chicago-based carrier has doubled down on long-haul, international travel with a robust summer 2024 schedule and orders for hundreds of new Boeing 787s to drive growth later in the decade.
“Ultimately, as you approach the end of this decade, the growth in the United States will be very much tied to GDP,” Nocella said at the Skift Aviation Forum in Fort Worth, Texas, Wednesday. That rate of economic activity-tied growth has long been true for mature aviation markets.
“But growing overseas, we think there’s just a lot more opportunity,” Nocella continued.
United saw record profits across both the Atlantic and Pacific in the third quarter. International yields, a rough proxy for airfares, as a whole increased 3.2% during the period; significantly better than the flat yields United saw systemwide.
United Airlines: Can the Boom Continue?
But many wonder if the international boom can continue. As U.S. domestic yields came down this summer following their surge in 2022, some believe airlines could see the same on transatlantic flights next summer. That’s especially true given the industry-wide capacity increases in the market as players from American Airlines to Lufthansa and United grow by double digits.
“The current cycle we expect to last a very long time,” Nocella said.
Long-haul international routes, for all their prestige, require higher levels of investment — all those new 787s don’t come cheap — and cost more to operate. The payoffs can be commensurately large, but so can the losses.
Nocella had an answer for that as well. United, he said, does not “buy into” the idea of operating a route today that will payoff in five or 10 years time. These routes are often called “strategic flying” by airlines. Any new route for United must turn a profit in its second year, he added.
In recent years, United has tried new flights to Bergen, Norway, and between Washington Dulles and Berlin. Both routes were dropped after a single season.
Test Markets
This does not mean the airline will not try new, potentially untested, markets in the future. To the contrary, Nocella said he is willing to try routes that look like they will turn a profit. And, United is uniquely positioned, as Nocella sees it, with its hubs to try more routes to smaller markets in Africa, Asia, Europe, the Middle East, and South America.
Newark and Washington Dulles are United’s main gateways to Europe, the Middle East, and Africa. Houston to Latin America. And San Francisco to Asia and Australia.
United will begin taking delivery of 50 Airbus A321XLRs, the longer-range version of the planemaker’s popular A321neo, in 2025. Those planes will replace older Boeing 757s but also open new, smaller markets for the airline in, for example, Europe from Newark and Washington.
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