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United Airlines 1
Embry-Riddle Aeronautical University
AS 402 – Airline Operations
April 7, 2016
Group J
Produced By: Psotta, Whittmore
United Airlines 2
Contents
Abstract.............................................................................................................................................3
History...............................................................................................................................................4
Headquarters & Mergers.....................................................................................................................5
Fleet..................................................................................................................................................7
Current Headlines...............................................................................................................................8
Financial Performance ........................................................................................................................9
Recent Progress..................................................................................................................................9
New Strategy for Profit.....................................................................................................................10
Profit Numbers.................................................................................................................................11
Bankruptcy History...........................................................................................................................12
United Airlines Domestic Route Structure Map...................................................................................13
Code Sharing....................................................................................................................................22
Accidents and Incidents....................................................................................................................23
United Airlines Marketing .................................................................................................................24
United Airlines Logo History..............................................................................................................25
United Livery History ........................................................................................................................28
1974-1993 "Tulip".........................................................................................................................29
2004-2010 "Rising Blue"................................................................................................................30
2010 - Present "Globe"..................................................................................................................31
United Frequent Flyer Program .........................................................................................................32
Classes of Tickets..............................................................................................................................33
United Salaries .................................................................................................................................34
Code Sharing....................................................................................................................................39
Daily International Flights..................................................................................................................39
Passengers per Year..........................................................................................................................39
Global Alliance Partnership ...............................................................................................................41
United Airlines Cargo Operations.......................................................................................................42
International Cargo...........................................................................................................................43
Conclusion .......................................................................................................................................44
Sources............................................................................................................................................45
United Airlines 3
Abstract
United Airlines has come a long way from its humble beginning in 1937. It is an
airline embodied with rich history and considered one of the most successful airlines to
date. Like many other airlines, United has gone through arduous changes due to the
ebbs and flows of the economy. However, United has persevered by adapting to the
ever changing oligopoly that exists in the industry today. With both domestic and
international segments, United offers quality services which has contributed to their
success as one of the best legacy carriers to do business with today.
United Airlines 4
Statement of Purpose: This paper presents findings and analysis of United Airlines
ranging from inception to fiscal year 2016. Key topics include company history, logos,
livery, financial performance, key mergers, United’s fleet, domestic and international
statistics, code sharing relationships, marketing segments and United’s frequent flyer
program.
History
United Airlines Inc. was first officially formed in 1937 when it became
independent from Boeing Airplane Co. Boeing Airplane Co. was formed to fly mail
routes and commercial services between Chicago and San Francisco in 1927. In 1948
UAL, based in Chicago, established its Denver hub. In 1961 UAL merged with Capital
Airlines which made UAL the world’s largest airline. In the 1980’s UAL added rental car
and hotel chains to its holdings, changing its name to Allegis. A group of investors and
pilots forced Allegis to sell its non-airline businesses and change their name back to
UAL in 1987. In 1991-1993 UAL lost a total of $1.3 billion over three years due to an
economic recession and the Persian Gulf War which ended up cutting demand and
increasing fuel prices. In 1994 the airline’s pilots, mechanics, and other ground workers
created an employee stock-ownership plan (ESOP) because they faced a threat to their
jobs. This turned UAL into the world’s largest employee-owned company. In May 2000,
UAL announced plans to merge with US Airways however United abandoned the
merger in July 2001. This caused UAL to lose $865 million in 12 months due to
insurmountable government antitrust opposition (Reference #1).
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Due to the crashing airline business caused by the 9/11 attacks, UAL ended up
laying off 1,500 employees, cutting 9,000 jobs, eliminating six percent of its 1,800 daily
flights, retiring 49 aircraft, and delaying the purchase of at least 25 others between
October 2002 and November 2002. In December of 2002, the government rejected
UAL’s request for $1.8 billion loan guarantee. All of these events pushed UAL over the
edge and caused them to file for bankruptcy in December 2002. In 2004 UAL launched
a low-cost carrier named Ted from Denver in order to compete with Frontier Airlines.
Headquarters & Mergers
Currently United Airlines Inc. is a major airline with their headquarters in Chicago.
With many carriers finding new ways to diversify, United Airlines, in late 2015, decided
to cut its daily service from Newark to Bermuda due to the slower demand during the
winter months. All of this contributed to strategic management plans to maximize
revenues. In an interview with Aaron Adderley, who is the airport manager at Bermuda
International Airport, he stated only 50-60 percent of seats were being filled to this
destination from Newark (Reference #2). This low percentage deemed not profitable
which is why United made the decision to adjust its winter destination schedule
accordingly. It is also reported United burned through three CEO’s in the past five
months, to search for the newly founded strategy to compete with the market
(Reference #3). However the current CEO, Oscar Munoz, at the end of 2015, suffered
from a heart attack and is currently recovering. In January, Oscar Munoz sent out a
personally written letter to his United Employees updating the masses on his current
health status and provided his vision for the next monumental steps for the company.
He is quoted as saying the following…
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As I thought about my return, I gave careful consideration to what greater things
we can do together, and that has spurred my recovery. We've made a lot of
positive changes these past few months thanks to your efforts. Take pride in
these accomplishments and our success. Remember, even better days lie ahead
if we stay focused on consistently earning our customer's' trust. Keep up the
great work, and I look forward to seeing you soon. (Reference #4).
Brent Bowen, the Dean of the College of Aviation at Embry-Riddle Aeronautical
University located in Prescott, Arizona was interviewed and asked what United is doing
wrong. He simply stated that the carrier is not listening to is customer base and
identifying their key travel destinations. A recent passenger also stated, by his
perception, United is seemingly “tone-deaf” to its customers (Reference #3).
Amidst all these negatives, not all is bad as the merger has proved complicated
for United. Sorting through the old model and incorporating the new changes to adapt to
the merger is still being dealt with today. However, record profits are soaring to an all-
time high. Tweaking smaller aspects of their current management plan is going to prove
to be the key to success for the carrier.
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Fleet
Currently United Airlines the fleet is as follows:
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The United Express Branch Fleet
(Reference #5)
Current Headlines
United’s average annual revenue is 38.9 billion dollars. The best financial year
for UAL was in 2015. In the first two quarters United Airlines was showing the best
profits in the history of the company. In the first quarter of 2015, UAL made a net profit
of 509 million dollars and in the second quarter they made a net profit of 1.2 billion
dollars. The worst financial year for UAL was in 2008. The cause for this was due to the
recession caused by the World Trade Center attacks on the United States. United
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reported negative profits in all four quarters of 2008, losing up to a total of 3.8 billion
dollars.
Financial Performance
UAL’s financial performance from 2007 to 2014 is as follows:
● Made $349 million in 2007
● Lost $3.8 billion in 2008
● Lost $628 million in 2009
● Made $401 million in 2010
● Made $282 million in 2011
● Lost $661 million in 2012
● Made $654 million in 2013
● Made $424 million in 2014 (Reference #10)
Recent Progress
Most of the airlines are mutually dependent of one another. After surviving the
recession of 2008 and the attacks on the World Trade Centers, United as well as every
other carrier recovered. United has made some recent changes which greatly increased
their survivability. Despite struggles, United Airlines was not the only one affected by the
recession. Many other airlines were feeling the ripple effect and United was making
measurable strides to stay in business.
One of the most recent changes United made in late 2015 was shifting
operations from JFK international airport to Newark. This was not an easy task,
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however, as many other carriers were reluctant to allow United a bigger footprint in
Newark. United Airlines in late 2015 had 70% seat share at Newark. Other carriers
wanting to capitalize on Newark were concerned about a greater footprint which already
existed from United Airlines. United strategically made this negotiation, giving up their
position in transcontinental flights to other carriers located in San Francisco and Los
Angeles (Reference #24). This was a great move as United could then strategically
have the biggest footprint in Newark. Delta Airlines, who bought their tarmac spots from
United, was hoping to increase their footprint in JFK as they operated one of the larger
operations there. For both carriers it was a relatively easy decision. In addition, JFK is
very costly for carriers. It is not surprising to see UAL retreat to a more profitable area.
JFK already had 270 United employees with no return on their investment for many
years. Catering and staffing the United Club lounge for the premium passengers with
such few flights proved to be not profitable (Reference #23).
New Strategy for Profit
The partnership created with Middle Eastern carriers such as Emirates, Etihad,
and Qatar had proved a negative impact for international bookings from domestic
carriers. The partnership for open and fair skies, a coalition that included United
Airlines, American Airlines, Delta Airlines, and a number of labor groups representing
airline workers, released a report expressing Middle East carriers were undercutting
domestic carriers in terms of profitability. The new data unveiled specifically examined
San Francisco, Orlando, and Chicago, where United is headquartered. The analysis
found an 8.8% drop in international bookings from the three U.S. airliners (Reference
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#22). The analysis determined massively subsidized Gulf carriers such as Emirates and
Etihad were damaging the partnership.
As for United’s stance, they are allowing the partnership to do most of the work
and governmental intervention to make improvements to the situation. In terms of
middle-eastern carriers, much of the profits are not equal (Reference #26). Since the
Middle East airlines are threatening domestic airlines with their exceeding profits and
well-funded subsidies, it is making it very difficult for United Airlines to capitalize on
international markets. In time, we shall start to see an evening of this alliance and a
restructuring of the agreement initially proposed.
Profit Numbers
United Airlines reported a full-year net income of 4.5 billion dollars which equates
to 11.88 dollars per diluted share, excluding special items. Including special items, UAL
reported a full-year net income of 7.3 billion dollars. United Airlines also reported fourth-
quarter net income of 934 million dollars, or 2.54 dollars per diluted share, excluding
special items. Including special items, United Airlines reported fourth-quarter net income
of 823 million dollars. In 2016, United Airlines announced they reached an agreement to
acquire 40 new Boeing 737-700 aircraft which will enter the fleet beginning in the mid-
2017s. This will replace a portion of the capacity currently operated by regional
partners. Employees earned a record 698 million dollars in profit sharing for the full year
of 2015 (Reference #25). Chief Executive Officer of UAL was quoted as saying…
United Airlines 12
“We improved our operational performance, continue to invest in our products
and services and achieved record financial performance. We have great momentum as
we head into 2016 and are committed to continually earning the trust of our customers
and employees. I am proud of what we will accomplish together, running a reliable
airline in making the right investments to deliver shareholder value. We expect first
quarter pre-tax margin to be between eight to ten percent, excluding special items.”
(Reference #7)
Bankruptcy History
Since deregulation in 1978, it was reported that United Airlines had only filed
bankruptcy one time, which occurred in December 9th of 2002. Statistically this is much
better than many other carriers as some flourished in their attempt to file for bankruptcy
in an attempt to recover (Reference #8). US Airways has reportedly filed for bankruptcy
twice. The first time in August of 2002 and shortly thereafter in September of 2004.
Many other airlines after filing for bankruptcy, seceded to merges or went completely
out of business. United has not. ((Reference #27))
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United Airlines Domestic Route Structure Map
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Chicago International Airport
United Airlines operates from seven hubs in the United States. Chicago O’Hare
International Airport in Chicago, Illinois is their busiest hub with nearly 550 daily flights
out of O’Hare. UAL operates more than 50 of these flights to 40 international
destinations and nearly 500 of these flights to 140 domestic destinations.
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Houston International Airport
Houston George Bush Intercontinental Airport located in Houston, TX is United
Airlines’ second busiest hub with 539 daily flights out of Houston. UAL averages more
United Airlines 16
than 100 daily flights to 64 international destinations and approximately 430 daily flights
to more than 155 domestic locations out of Houston.
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Newark International Airport
Newark Liberty International Airport located in Newark, NJ is United Airlines’ third
busiest hub with 400 daily flights out of Newark. UAL operates 79 of these flights to 73
international destinations and approximately 310 of these flights to 85 domestic
destinations.
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Denver International Airport
Denver International Airport located in Denver, CO is United Airlines’ fourth
busiest hub with 367 daily flights out of Denver. UAL operates 17 of these flights to 15
international destinations and more than 350 of these flights to 125 domestic
destinations.
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San Francisco International Airport
San Francisco International Airport located in San Francisco, CA is United
Airlines’ fifth busiest hub with 260 daily flights out of San Francisco. UAL operates 28 of
these flights to 22 international destinations and nearly 235 of these flights to 69
domestic destinations.
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Washington Dulles International Airport
Washington Dulles International Airport located in Dulles, VA is United Airlines
sixth busiest hub with approximately 220 daily flights out of Dulles. UAL operates 31 of
these flights to 30 international destinations and 180 of these flights to 69 domestic
destinations.
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Los Angeles International Airport
Los Angeles International Airport located in Los Angeles, CA is United Airlines
seventh busiest hub with 150 daily flights out of Los Angeles. UAL operates 12 of these
flights to 13 international destinations and 130 of these flights to 45 domestic
destinations (Reference #9)
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Code Sharing
Amongst many airlines, most choose to participate in some type of commercial
code agreement to extend their products and services to many other carriers without the
added cost of operation. United is no exception. Below is a chart indicating the current
code sharing agreements United Airlines has with other carriers in the industry.
Approximately 70% of the awarded code sharing with other airlines is domestic.
However, the remaining 30% of the code sharing is international. In addition to this
being a great way to partner with other companies on an independent basis, the
intertwined nature creates a more stable industry amongst key carriers. United Airlines
has made many strides to attach itself to key carriers to include all of Nippon.
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In terms of city pairs with other companies, the list is as follows for fiscal year 2016.
(Reference #28)
Accidents and Incidents
According to the Bureau of Aircraft Accidents Archives, United Airlines has had
66 total crashes since it became a national career in 1933. The most recent is the
terrorist attacks of September 11th 2001. A total 1,216 people have been killed since
inception. Statistically speaking, for the nature of how long United has been in
existence, those numbers are very low. Computing those casualty figures over 83 years
in business equates to only approximately 15 casualties each year. (Reference #29)
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United Airlines Marketing
When discussing the oligopoly nature of the airline industry today, many carriers
are trying to differentiate themselves amongst their competition. However, in recent
years, United’s marketing strategy has lacked in comparison to Delta, Southwest, and
American Airlines. Competing for customer loyalty through many amenities on board is
one of the strategies United Airlines is incorporating to promote sales. In July of 2015
United launched “This is the Journey Campaign” nationwide on cable and local TV
stations located specifically in key markets such as Chicago, San Francisco, New York
City, and Houston (Reference #31)
One commercial, displayed many common amenities such as power charging
ports, Wi-Fi, roomier economy seating, and the United Mobile App. With the United
Mobile App, passengers have the ability to watch movies on their tablets, computers, or
smartphones while in transit to their destination using the United mobile app. Despite
the introduction of this newly founded strategy, it is pretty evident many other carriers
have been using these “bells and whistles” for quite some time.
Marketing Consulting Agency
United Airlines has reported to have utilized many consulting firms to increase
profitability and customer response. United hired a consulting company by the name of
Prophet. Prophet’s main business model is to grow businesses, transform customer
experiences, and build brand loyalty.
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With United desperately attempting to differentiate themselves from their
competition, Prophet worked in collaboration with United to re- identify key points to
promote profitability. One of the key developments Prophet and United decided upon
was to adopt a unique service philosophy in which loyalty members and regular
customers would feel well respected, relaxed, and rewarded for choosing to do
business with United. After adopting these suggested marketing techniques, it was
reported in 2012, United surpassed American Airlines in terms percentage of Super
Elite customers. They also reported exceeding American and customer experience
reviews (Reference #30).
United Airlines Logo History
United Airlines was founded in Boise, Idaho in 1926 as Varney Air Lines – an air
mail service of Walter Varney who also founded Varney Speed Lines which later
became Continental Airlines. In 1927, Varney Air Lines was renamed Boeing Air
Transport after it was acquired by the aircraft manufacturer.
In 1933, United began operating the Boeing 247. This plane was the first mass
produced, all-metal construction to be utilized in the airline industry. It was also able to
fly transcontinental in 20 hours, which made it significantly faster than its earlier
predecessors.
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United Airlines first logo included an outline of the U.S. map. Note: In the picture
below there is the use of the term “Air Lines” versus what the airline industry uses
today- “Airlines”:
After passage of the Air Mail Act in 1934, United became an independent
company again and their logo remained this way until 1939:
United Airlines 27
Through the 1930s and 1940s, the United Airlines logo took on the look of a
badge or shield. They also added the U.S. map to demonstrate coast to coast service
and later deleted it again:
In the mid-1950s through the 1960s, the shield theme held, but it was slanted:
In the 1970s, United’s logo took on the tulip shape. In addition, the ‘U’ shape
effect continued through 2010. I was here that the term “Airlines” became a single word:
United Airlines 28
In 2010, United acquired Continental Airlines in a merge. This was a strange
twist of fate considering both were started from the same guy, Walter Varney. The two
logos were merged as well (Reference #32)
United Livery History
1936-1973
While United didn't have a uniform livery until Saul Bass came in, they did generally
used a white livery with blue and red stripes. Notice that they have not yet adopted the
iconic tulip yet.
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1974-1993 "Tulip"
In 1973, United commissioned Saul Bass creating the iconic tulip livery. While the
fuselage was kept similar, the colors of the stripes were switched to a simple blue and
red to a tricolor orange, red and blue. This was also the time they modernized their font.
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2004-2010 "Rising Blue"
To reflect their emergence from bankruptcy, United debuted the "Rising Blue" livery with
a white upper fuselage and blue on the bottom which assisted in rebranding UAL’s
image.
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2010 - Present "Globe"
After merging with Continental, United adopted the old Continental "Globe" livery to
reflect the image of how UCL was less a takeover and more a merger of two equal
brands. Slight irony in the fact that Continental doesn't exist anymore, but more planes
fly in its colors than ever before (Reference #32).
United Airlines 32
United Frequent Flyer Program
United Airlines’ frequent flyer program is coined MileagePlus. There are various
ways to earn miles. The most straightforward way to earn miles is to fly with United or
United Express. However, you can earn points flying with United’s other carrier
partners. In addition, customers may earn miles by staying at select hotels such as
Marriott, Hilton, IHG, and many more. The same goes with earning miles by renting cars
from Hertz, Dollar and Thrifty, or other ground transportation and parking partners.
Earning miles by traveling on Amtrak rail service is also possible.
Transferring / Donating Miles
UAL allows members of the MileagePlus program to buy, transfer, and donate
miles. If a customer is short on miles for an awarded trip or an upgrade, they can elect
to buy the extra miles they need, saving on the cost of travels.
Prices rates are as follows:
 $35 / 1000 miles (Minimum purchase > 2000 miles)
 Transfer 500 miles > 25,000 miles to another person
 Transfer $7.50 / 500 miles (Plus $30 transaction fee)
 Reinstatement program for expired miles > 18 months ($50 fee)
 Purchase miles for as gift for another member
There are a few other ways to earn miles with the MileagePlus program as well
through various everyday activities. Members can earn miles with the MileagePlus Visa
Explorer card from Chase and other credit card partners. Rewards points are offered
United Airlines 33
through online shopping incentives which match dollar for dollar spending to
MileagePlus rewards. Lastly, you can earn miles through spending on home, auto, and
energy as well as business-related activities ((Reference #34).
Classes of Tickets
Classes of tickets are as follows in order of most expensive:
1. First Class
2. Business
3. Economy or Coach
Within these classes there are other various fare types based on what time
period the passenger purchased for the ticket and whether or not any upgraded
amenities were selected for additional cost. If customers are MileagePlus members, all
rewards will be accrued from the purchase. There are 17 different fare types for coach,
17 different fare types for business, and 4 different fare types for first class.
United Airlines has 82,000 employees as of 2015 (Reference #16). The
breakdown is as follows:
 12,505 are pilots (Reference #14)
 The pilots at United joined the Air Line Pilots Association in 1932
(Reference #15)
 15,000 flight attendants are represented by the United Association of Flight
Attendants at United Airlines (Reference #17)
 The current contract agreement between the Association of Flight Attendants-
CWA and United Airlines is for the years 2012-2016 (Reference #17)
United Airlines 34
 There are 10,638 mechanics at United (Reference #19)
 They are Represented by the Teamsters Airline Division (Reference #18)
United Salaries
Pilot salaries / statistics:
Starting Salaries: $48,026
Top Salaries: $206,229 (Reference #20)
Ratio to Aircraft: The pilot to aircraft ratio is 17:1
Amount hired per month: 50 pilots / month (Reference #14)
In 1995, United introduced an employee ownership program. During this year the
new ESOP owned 55% of the company. However, in 2000, the program was
disbanded. It is speculated the fall of the ESOP program can be traced back to
excessive union control (Reference #21). However, United has claimed to have good
relations with their employees. They are open to negotiations from several union groups
including ALPA, AFA, and Teamsters (Reference #15). United also has various
employee benefits available such as free travel, bonuses, and paid time off.
United Airlines 35
International Hubs
As previously mentioned United does not have a huge international presence
and maintains a relatively small footprint. Currently United Airlines has only 4
international hubs which are as follows:
Frankfurt, Germany
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Guam
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London, United Kingdom
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Tokyo, Japan
(Reference #35)
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Code Sharing
Excluding United operated hubs, United also has Star Alliance partners which
have locations in many other countries. With code sharing, United is able to have its
imprint in international markets with the less hassle of high operational costs.
Daily International Flights
United serves more than 50 flights to more than 40 international destinations
from Chicago International Airport each day. Below is an illustrated breakdown of these
flights:
 9 daily flights to 10 cities in Europe
 4 daily flights to 4 cities in Asia
 11 daily flights to 20 destinations across Latin America and the Caribbean
 27 daily flights to 9 destinations in Canada
United operates nearly 550 daily flights just out of Chicago O’Hare alone. In
addition, United also has more than 50 daily flight to more than 40 international
destinations from Chicago International Airport (ORD). Chicago being one of the biggest
hubs within United, 500 flights to 140 airports across the United States depart out of
ORD every day (Reference #36).
Passengers per Year
Annually United transports 15.7 million passengers per year. Daily, this figure equates
to 42,900 passengers.
United Airlines 40
Annual RPM RPK
A review of United’s 2014 annual financial report states the following in terms of RPM
and RPK:
2014 – FinancialReport
(Reference #37)
United Airlines 41
Global Alliance Partnership
United is part of the Star Alliance which United uses to code share with other
carriers as mentioned previously. Here is a graphic displaying the Star Alliance carrier
grouping:
(Reference #11)
United Airlines 42
United Airlines Cargo Operations
United Airlines has cargo operations; the segment of the company is called
United Cargo. The carrier offers the following package and specifications are as follows:
United Airlines 43
As United’s footprint in the cargo business is small, with much of the market
share taken up by FedEx and USPS, United keeps its focus on a smaller convenient
point-to-point (or airport to airport shipping). United also accepts live animals with the
confines of the animal being in a shipping approved container (Reference #12)
International Cargo
United Airlines does travel to international destinations mostly departing out of
Washington, DC. From DC, United transports cargo to the following locations:
 Amsterdam
 Sao Paulo
 Paris
 Geneva
 Tokyo
 Beijing
 Rome
 Frankfort
 **Brussels**
** Note: As of 03/25/16 United tightened its restrictions going into Brussels and limited
what types of cargo they received due to the airport bombing attack. ** (Reference #13).
Future International Plans
Currently United does not have plans to expand its international market for cargo
operations. United manly is focusing on international markets with its passenger sector
as previously mentioned.
United Airlines 44
Conclusion
This paper presented findings and analysis of United Airlines ranging from
inception to fiscal year 2016. Key topics included company history, logos, livery,
financial performance, key mergers, United’s fleet, domestic and international statistics,
code sharing relationships, marketing segments and United’s frequent flyer program. In
conclusion, United Airlines has come a long way since the beginning in 1937. It is an
airline embodied with rich history and considered one of the most successful airlines to
date. Like many other airlines, United has gone through arduous changes due to the
ebbs and flows of the economy. However, United has persevered by adapting to the
ever changing oligopoly that exists in the industry today. With both domestic and
international segments, United offers quality services which has contributed to their
success as one of the best legacy carriers to do business with today.
United Airlines 45
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United Airlines 47
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craft=0&operator=193713&cause=0&et_searchform_submit=et_search_proccess
Reference #30
https://www.prophet.com/impact/projects/unitedairlines
Reference #31
http://www.bizjournals.com/chicago/news/2015/04/07/united-airlines-gives-fliers-
permission-to-well.html
Reference #32
http://www.travelinsurancereview.net/2013/06/03/airline-logos-over-time/
Reference #33
http://www.cwsi.net/united.htm
Reference #34
https://www.united.com/web/en-US/content/mileageplus/Default.aspx
Reference #35
https://www.united.com/web/en-US/content/travel/airport/maps/default.aspx
Reference #36
https://www.united.com/web/en-US/content/travel/destination/routes/served.aspx
Reference #37
ir.united.com/financial-performance/sec-filings

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Analysis United Airlines

  • 1. United Airlines 1 Embry-Riddle Aeronautical University AS 402 – Airline Operations April 7, 2016 Group J Produced By: Psotta, Whittmore
  • 2. United Airlines 2 Contents Abstract.............................................................................................................................................3 History...............................................................................................................................................4 Headquarters & Mergers.....................................................................................................................5 Fleet..................................................................................................................................................7 Current Headlines...............................................................................................................................8 Financial Performance ........................................................................................................................9 Recent Progress..................................................................................................................................9 New Strategy for Profit.....................................................................................................................10 Profit Numbers.................................................................................................................................11 Bankruptcy History...........................................................................................................................12 United Airlines Domestic Route Structure Map...................................................................................13 Code Sharing....................................................................................................................................22 Accidents and Incidents....................................................................................................................23 United Airlines Marketing .................................................................................................................24 United Airlines Logo History..............................................................................................................25 United Livery History ........................................................................................................................28 1974-1993 "Tulip".........................................................................................................................29 2004-2010 "Rising Blue"................................................................................................................30 2010 - Present "Globe"..................................................................................................................31 United Frequent Flyer Program .........................................................................................................32 Classes of Tickets..............................................................................................................................33 United Salaries .................................................................................................................................34 Code Sharing....................................................................................................................................39 Daily International Flights..................................................................................................................39 Passengers per Year..........................................................................................................................39 Global Alliance Partnership ...............................................................................................................41 United Airlines Cargo Operations.......................................................................................................42 International Cargo...........................................................................................................................43 Conclusion .......................................................................................................................................44 Sources............................................................................................................................................45
  • 3. United Airlines 3 Abstract United Airlines has come a long way from its humble beginning in 1937. It is an airline embodied with rich history and considered one of the most successful airlines to date. Like many other airlines, United has gone through arduous changes due to the ebbs and flows of the economy. However, United has persevered by adapting to the ever changing oligopoly that exists in the industry today. With both domestic and international segments, United offers quality services which has contributed to their success as one of the best legacy carriers to do business with today.
  • 4. United Airlines 4 Statement of Purpose: This paper presents findings and analysis of United Airlines ranging from inception to fiscal year 2016. Key topics include company history, logos, livery, financial performance, key mergers, United’s fleet, domestic and international statistics, code sharing relationships, marketing segments and United’s frequent flyer program. History United Airlines Inc. was first officially formed in 1937 when it became independent from Boeing Airplane Co. Boeing Airplane Co. was formed to fly mail routes and commercial services between Chicago and San Francisco in 1927. In 1948 UAL, based in Chicago, established its Denver hub. In 1961 UAL merged with Capital Airlines which made UAL the world’s largest airline. In the 1980’s UAL added rental car and hotel chains to its holdings, changing its name to Allegis. A group of investors and pilots forced Allegis to sell its non-airline businesses and change their name back to UAL in 1987. In 1991-1993 UAL lost a total of $1.3 billion over three years due to an economic recession and the Persian Gulf War which ended up cutting demand and increasing fuel prices. In 1994 the airline’s pilots, mechanics, and other ground workers created an employee stock-ownership plan (ESOP) because they faced a threat to their jobs. This turned UAL into the world’s largest employee-owned company. In May 2000, UAL announced plans to merge with US Airways however United abandoned the merger in July 2001. This caused UAL to lose $865 million in 12 months due to insurmountable government antitrust opposition (Reference #1).
  • 5. United Airlines 5 Due to the crashing airline business caused by the 9/11 attacks, UAL ended up laying off 1,500 employees, cutting 9,000 jobs, eliminating six percent of its 1,800 daily flights, retiring 49 aircraft, and delaying the purchase of at least 25 others between October 2002 and November 2002. In December of 2002, the government rejected UAL’s request for $1.8 billion loan guarantee. All of these events pushed UAL over the edge and caused them to file for bankruptcy in December 2002. In 2004 UAL launched a low-cost carrier named Ted from Denver in order to compete with Frontier Airlines. Headquarters & Mergers Currently United Airlines Inc. is a major airline with their headquarters in Chicago. With many carriers finding new ways to diversify, United Airlines, in late 2015, decided to cut its daily service from Newark to Bermuda due to the slower demand during the winter months. All of this contributed to strategic management plans to maximize revenues. In an interview with Aaron Adderley, who is the airport manager at Bermuda International Airport, he stated only 50-60 percent of seats were being filled to this destination from Newark (Reference #2). This low percentage deemed not profitable which is why United made the decision to adjust its winter destination schedule accordingly. It is also reported United burned through three CEO’s in the past five months, to search for the newly founded strategy to compete with the market (Reference #3). However the current CEO, Oscar Munoz, at the end of 2015, suffered from a heart attack and is currently recovering. In January, Oscar Munoz sent out a personally written letter to his United Employees updating the masses on his current health status and provided his vision for the next monumental steps for the company. He is quoted as saying the following…
  • 6. United Airlines 6 As I thought about my return, I gave careful consideration to what greater things we can do together, and that has spurred my recovery. We've made a lot of positive changes these past few months thanks to your efforts. Take pride in these accomplishments and our success. Remember, even better days lie ahead if we stay focused on consistently earning our customer's' trust. Keep up the great work, and I look forward to seeing you soon. (Reference #4). Brent Bowen, the Dean of the College of Aviation at Embry-Riddle Aeronautical University located in Prescott, Arizona was interviewed and asked what United is doing wrong. He simply stated that the carrier is not listening to is customer base and identifying their key travel destinations. A recent passenger also stated, by his perception, United is seemingly “tone-deaf” to its customers (Reference #3). Amidst all these negatives, not all is bad as the merger has proved complicated for United. Sorting through the old model and incorporating the new changes to adapt to the merger is still being dealt with today. However, record profits are soaring to an all- time high. Tweaking smaller aspects of their current management plan is going to prove to be the key to success for the carrier.
  • 7. United Airlines 7 Fleet Currently United Airlines the fleet is as follows:
  • 8. United Airlines 8 The United Express Branch Fleet (Reference #5) Current Headlines United’s average annual revenue is 38.9 billion dollars. The best financial year for UAL was in 2015. In the first two quarters United Airlines was showing the best profits in the history of the company. In the first quarter of 2015, UAL made a net profit of 509 million dollars and in the second quarter they made a net profit of 1.2 billion dollars. The worst financial year for UAL was in 2008. The cause for this was due to the recession caused by the World Trade Center attacks on the United States. United
  • 9. United Airlines 9 reported negative profits in all four quarters of 2008, losing up to a total of 3.8 billion dollars. Financial Performance UAL’s financial performance from 2007 to 2014 is as follows: ● Made $349 million in 2007 ● Lost $3.8 billion in 2008 ● Lost $628 million in 2009 ● Made $401 million in 2010 ● Made $282 million in 2011 ● Lost $661 million in 2012 ● Made $654 million in 2013 ● Made $424 million in 2014 (Reference #10) Recent Progress Most of the airlines are mutually dependent of one another. After surviving the recession of 2008 and the attacks on the World Trade Centers, United as well as every other carrier recovered. United has made some recent changes which greatly increased their survivability. Despite struggles, United Airlines was not the only one affected by the recession. Many other airlines were feeling the ripple effect and United was making measurable strides to stay in business. One of the most recent changes United made in late 2015 was shifting operations from JFK international airport to Newark. This was not an easy task,
  • 10. United Airlines 10 however, as many other carriers were reluctant to allow United a bigger footprint in Newark. United Airlines in late 2015 had 70% seat share at Newark. Other carriers wanting to capitalize on Newark were concerned about a greater footprint which already existed from United Airlines. United strategically made this negotiation, giving up their position in transcontinental flights to other carriers located in San Francisco and Los Angeles (Reference #24). This was a great move as United could then strategically have the biggest footprint in Newark. Delta Airlines, who bought their tarmac spots from United, was hoping to increase their footprint in JFK as they operated one of the larger operations there. For both carriers it was a relatively easy decision. In addition, JFK is very costly for carriers. It is not surprising to see UAL retreat to a more profitable area. JFK already had 270 United employees with no return on their investment for many years. Catering and staffing the United Club lounge for the premium passengers with such few flights proved to be not profitable (Reference #23). New Strategy for Profit The partnership created with Middle Eastern carriers such as Emirates, Etihad, and Qatar had proved a negative impact for international bookings from domestic carriers. The partnership for open and fair skies, a coalition that included United Airlines, American Airlines, Delta Airlines, and a number of labor groups representing airline workers, released a report expressing Middle East carriers were undercutting domestic carriers in terms of profitability. The new data unveiled specifically examined San Francisco, Orlando, and Chicago, where United is headquartered. The analysis found an 8.8% drop in international bookings from the three U.S. airliners (Reference
  • 11. United Airlines 11 #22). The analysis determined massively subsidized Gulf carriers such as Emirates and Etihad were damaging the partnership. As for United’s stance, they are allowing the partnership to do most of the work and governmental intervention to make improvements to the situation. In terms of middle-eastern carriers, much of the profits are not equal (Reference #26). Since the Middle East airlines are threatening domestic airlines with their exceeding profits and well-funded subsidies, it is making it very difficult for United Airlines to capitalize on international markets. In time, we shall start to see an evening of this alliance and a restructuring of the agreement initially proposed. Profit Numbers United Airlines reported a full-year net income of 4.5 billion dollars which equates to 11.88 dollars per diluted share, excluding special items. Including special items, UAL reported a full-year net income of 7.3 billion dollars. United Airlines also reported fourth- quarter net income of 934 million dollars, or 2.54 dollars per diluted share, excluding special items. Including special items, United Airlines reported fourth-quarter net income of 823 million dollars. In 2016, United Airlines announced they reached an agreement to acquire 40 new Boeing 737-700 aircraft which will enter the fleet beginning in the mid- 2017s. This will replace a portion of the capacity currently operated by regional partners. Employees earned a record 698 million dollars in profit sharing for the full year of 2015 (Reference #25). Chief Executive Officer of UAL was quoted as saying…
  • 12. United Airlines 12 “We improved our operational performance, continue to invest in our products and services and achieved record financial performance. We have great momentum as we head into 2016 and are committed to continually earning the trust of our customers and employees. I am proud of what we will accomplish together, running a reliable airline in making the right investments to deliver shareholder value. We expect first quarter pre-tax margin to be between eight to ten percent, excluding special items.” (Reference #7) Bankruptcy History Since deregulation in 1978, it was reported that United Airlines had only filed bankruptcy one time, which occurred in December 9th of 2002. Statistically this is much better than many other carriers as some flourished in their attempt to file for bankruptcy in an attempt to recover (Reference #8). US Airways has reportedly filed for bankruptcy twice. The first time in August of 2002 and shortly thereafter in September of 2004. Many other airlines after filing for bankruptcy, seceded to merges or went completely out of business. United has not. ((Reference #27))
  • 13. United Airlines 13 United Airlines Domestic Route Structure Map
  • 14. United Airlines 14 Chicago International Airport United Airlines operates from seven hubs in the United States. Chicago O’Hare International Airport in Chicago, Illinois is their busiest hub with nearly 550 daily flights out of O’Hare. UAL operates more than 50 of these flights to 40 international destinations and nearly 500 of these flights to 140 domestic destinations.
  • 15. United Airlines 15 Houston International Airport Houston George Bush Intercontinental Airport located in Houston, TX is United Airlines’ second busiest hub with 539 daily flights out of Houston. UAL averages more
  • 16. United Airlines 16 than 100 daily flights to 64 international destinations and approximately 430 daily flights to more than 155 domestic locations out of Houston.
  • 17. United Airlines 17 Newark International Airport Newark Liberty International Airport located in Newark, NJ is United Airlines’ third busiest hub with 400 daily flights out of Newark. UAL operates 79 of these flights to 73 international destinations and approximately 310 of these flights to 85 domestic destinations.
  • 18. United Airlines 18 Denver International Airport Denver International Airport located in Denver, CO is United Airlines’ fourth busiest hub with 367 daily flights out of Denver. UAL operates 17 of these flights to 15 international destinations and more than 350 of these flights to 125 domestic destinations.
  • 19. United Airlines 19 San Francisco International Airport San Francisco International Airport located in San Francisco, CA is United Airlines’ fifth busiest hub with 260 daily flights out of San Francisco. UAL operates 28 of these flights to 22 international destinations and nearly 235 of these flights to 69 domestic destinations.
  • 20. United Airlines 20 Washington Dulles International Airport Washington Dulles International Airport located in Dulles, VA is United Airlines sixth busiest hub with approximately 220 daily flights out of Dulles. UAL operates 31 of these flights to 30 international destinations and 180 of these flights to 69 domestic destinations.
  • 21. United Airlines 21 Los Angeles International Airport Los Angeles International Airport located in Los Angeles, CA is United Airlines seventh busiest hub with 150 daily flights out of Los Angeles. UAL operates 12 of these flights to 13 international destinations and 130 of these flights to 45 domestic destinations (Reference #9)
  • 22. United Airlines 22 Code Sharing Amongst many airlines, most choose to participate in some type of commercial code agreement to extend their products and services to many other carriers without the added cost of operation. United is no exception. Below is a chart indicating the current code sharing agreements United Airlines has with other carriers in the industry. Approximately 70% of the awarded code sharing with other airlines is domestic. However, the remaining 30% of the code sharing is international. In addition to this being a great way to partner with other companies on an independent basis, the intertwined nature creates a more stable industry amongst key carriers. United Airlines has made many strides to attach itself to key carriers to include all of Nippon.
  • 23. United Airlines 23 In terms of city pairs with other companies, the list is as follows for fiscal year 2016. (Reference #28) Accidents and Incidents According to the Bureau of Aircraft Accidents Archives, United Airlines has had 66 total crashes since it became a national career in 1933. The most recent is the terrorist attacks of September 11th 2001. A total 1,216 people have been killed since inception. Statistically speaking, for the nature of how long United has been in existence, those numbers are very low. Computing those casualty figures over 83 years in business equates to only approximately 15 casualties each year. (Reference #29)
  • 24. United Airlines 24 United Airlines Marketing When discussing the oligopoly nature of the airline industry today, many carriers are trying to differentiate themselves amongst their competition. However, in recent years, United’s marketing strategy has lacked in comparison to Delta, Southwest, and American Airlines. Competing for customer loyalty through many amenities on board is one of the strategies United Airlines is incorporating to promote sales. In July of 2015 United launched “This is the Journey Campaign” nationwide on cable and local TV stations located specifically in key markets such as Chicago, San Francisco, New York City, and Houston (Reference #31) One commercial, displayed many common amenities such as power charging ports, Wi-Fi, roomier economy seating, and the United Mobile App. With the United Mobile App, passengers have the ability to watch movies on their tablets, computers, or smartphones while in transit to their destination using the United mobile app. Despite the introduction of this newly founded strategy, it is pretty evident many other carriers have been using these “bells and whistles” for quite some time. Marketing Consulting Agency United Airlines has reported to have utilized many consulting firms to increase profitability and customer response. United hired a consulting company by the name of Prophet. Prophet’s main business model is to grow businesses, transform customer experiences, and build brand loyalty.
  • 25. United Airlines 25 With United desperately attempting to differentiate themselves from their competition, Prophet worked in collaboration with United to re- identify key points to promote profitability. One of the key developments Prophet and United decided upon was to adopt a unique service philosophy in which loyalty members and regular customers would feel well respected, relaxed, and rewarded for choosing to do business with United. After adopting these suggested marketing techniques, it was reported in 2012, United surpassed American Airlines in terms percentage of Super Elite customers. They also reported exceeding American and customer experience reviews (Reference #30). United Airlines Logo History United Airlines was founded in Boise, Idaho in 1926 as Varney Air Lines – an air mail service of Walter Varney who also founded Varney Speed Lines which later became Continental Airlines. In 1927, Varney Air Lines was renamed Boeing Air Transport after it was acquired by the aircraft manufacturer. In 1933, United began operating the Boeing 247. This plane was the first mass produced, all-metal construction to be utilized in the airline industry. It was also able to fly transcontinental in 20 hours, which made it significantly faster than its earlier predecessors.
  • 26. United Airlines 26 United Airlines first logo included an outline of the U.S. map. Note: In the picture below there is the use of the term “Air Lines” versus what the airline industry uses today- “Airlines”: After passage of the Air Mail Act in 1934, United became an independent company again and their logo remained this way until 1939:
  • 27. United Airlines 27 Through the 1930s and 1940s, the United Airlines logo took on the look of a badge or shield. They also added the U.S. map to demonstrate coast to coast service and later deleted it again: In the mid-1950s through the 1960s, the shield theme held, but it was slanted: In the 1970s, United’s logo took on the tulip shape. In addition, the ‘U’ shape effect continued through 2010. I was here that the term “Airlines” became a single word:
  • 28. United Airlines 28 In 2010, United acquired Continental Airlines in a merge. This was a strange twist of fate considering both were started from the same guy, Walter Varney. The two logos were merged as well (Reference #32) United Livery History 1936-1973 While United didn't have a uniform livery until Saul Bass came in, they did generally used a white livery with blue and red stripes. Notice that they have not yet adopted the iconic tulip yet.
  • 29. United Airlines 29 1974-1993 "Tulip" In 1973, United commissioned Saul Bass creating the iconic tulip livery. While the fuselage was kept similar, the colors of the stripes were switched to a simple blue and red to a tricolor orange, red and blue. This was also the time they modernized their font.
  • 30. United Airlines 30 2004-2010 "Rising Blue" To reflect their emergence from bankruptcy, United debuted the "Rising Blue" livery with a white upper fuselage and blue on the bottom which assisted in rebranding UAL’s image.
  • 31. United Airlines 31 2010 - Present "Globe" After merging with Continental, United adopted the old Continental "Globe" livery to reflect the image of how UCL was less a takeover and more a merger of two equal brands. Slight irony in the fact that Continental doesn't exist anymore, but more planes fly in its colors than ever before (Reference #32).
  • 32. United Airlines 32 United Frequent Flyer Program United Airlines’ frequent flyer program is coined MileagePlus. There are various ways to earn miles. The most straightforward way to earn miles is to fly with United or United Express. However, you can earn points flying with United’s other carrier partners. In addition, customers may earn miles by staying at select hotels such as Marriott, Hilton, IHG, and many more. The same goes with earning miles by renting cars from Hertz, Dollar and Thrifty, or other ground transportation and parking partners. Earning miles by traveling on Amtrak rail service is also possible. Transferring / Donating Miles UAL allows members of the MileagePlus program to buy, transfer, and donate miles. If a customer is short on miles for an awarded trip or an upgrade, they can elect to buy the extra miles they need, saving on the cost of travels. Prices rates are as follows:  $35 / 1000 miles (Minimum purchase > 2000 miles)  Transfer 500 miles > 25,000 miles to another person  Transfer $7.50 / 500 miles (Plus $30 transaction fee)  Reinstatement program for expired miles > 18 months ($50 fee)  Purchase miles for as gift for another member There are a few other ways to earn miles with the MileagePlus program as well through various everyday activities. Members can earn miles with the MileagePlus Visa Explorer card from Chase and other credit card partners. Rewards points are offered
  • 33. United Airlines 33 through online shopping incentives which match dollar for dollar spending to MileagePlus rewards. Lastly, you can earn miles through spending on home, auto, and energy as well as business-related activities ((Reference #34). Classes of Tickets Classes of tickets are as follows in order of most expensive: 1. First Class 2. Business 3. Economy or Coach Within these classes there are other various fare types based on what time period the passenger purchased for the ticket and whether or not any upgraded amenities were selected for additional cost. If customers are MileagePlus members, all rewards will be accrued from the purchase. There are 17 different fare types for coach, 17 different fare types for business, and 4 different fare types for first class. United Airlines has 82,000 employees as of 2015 (Reference #16). The breakdown is as follows:  12,505 are pilots (Reference #14)  The pilots at United joined the Air Line Pilots Association in 1932 (Reference #15)  15,000 flight attendants are represented by the United Association of Flight Attendants at United Airlines (Reference #17)  The current contract agreement between the Association of Flight Attendants- CWA and United Airlines is for the years 2012-2016 (Reference #17)
  • 34. United Airlines 34  There are 10,638 mechanics at United (Reference #19)  They are Represented by the Teamsters Airline Division (Reference #18) United Salaries Pilot salaries / statistics: Starting Salaries: $48,026 Top Salaries: $206,229 (Reference #20) Ratio to Aircraft: The pilot to aircraft ratio is 17:1 Amount hired per month: 50 pilots / month (Reference #14) In 1995, United introduced an employee ownership program. During this year the new ESOP owned 55% of the company. However, in 2000, the program was disbanded. It is speculated the fall of the ESOP program can be traced back to excessive union control (Reference #21). However, United has claimed to have good relations with their employees. They are open to negotiations from several union groups including ALPA, AFA, and Teamsters (Reference #15). United also has various employee benefits available such as free travel, bonuses, and paid time off.
  • 35. United Airlines 35 International Hubs As previously mentioned United does not have a huge international presence and maintains a relatively small footprint. Currently United Airlines has only 4 international hubs which are as follows: Frankfurt, Germany
  • 37. United Airlines 37 London, United Kingdom
  • 38. United Airlines 38 Tokyo, Japan (Reference #35)
  • 39. United Airlines 39 Code Sharing Excluding United operated hubs, United also has Star Alliance partners which have locations in many other countries. With code sharing, United is able to have its imprint in international markets with the less hassle of high operational costs. Daily International Flights United serves more than 50 flights to more than 40 international destinations from Chicago International Airport each day. Below is an illustrated breakdown of these flights:  9 daily flights to 10 cities in Europe  4 daily flights to 4 cities in Asia  11 daily flights to 20 destinations across Latin America and the Caribbean  27 daily flights to 9 destinations in Canada United operates nearly 550 daily flights just out of Chicago O’Hare alone. In addition, United also has more than 50 daily flight to more than 40 international destinations from Chicago International Airport (ORD). Chicago being one of the biggest hubs within United, 500 flights to 140 airports across the United States depart out of ORD every day (Reference #36). Passengers per Year Annually United transports 15.7 million passengers per year. Daily, this figure equates to 42,900 passengers.
  • 40. United Airlines 40 Annual RPM RPK A review of United’s 2014 annual financial report states the following in terms of RPM and RPK: 2014 – FinancialReport (Reference #37)
  • 41. United Airlines 41 Global Alliance Partnership United is part of the Star Alliance which United uses to code share with other carriers as mentioned previously. Here is a graphic displaying the Star Alliance carrier grouping: (Reference #11)
  • 42. United Airlines 42 United Airlines Cargo Operations United Airlines has cargo operations; the segment of the company is called United Cargo. The carrier offers the following package and specifications are as follows:
  • 43. United Airlines 43 As United’s footprint in the cargo business is small, with much of the market share taken up by FedEx and USPS, United keeps its focus on a smaller convenient point-to-point (or airport to airport shipping). United also accepts live animals with the confines of the animal being in a shipping approved container (Reference #12) International Cargo United Airlines does travel to international destinations mostly departing out of Washington, DC. From DC, United transports cargo to the following locations:  Amsterdam  Sao Paulo  Paris  Geneva  Tokyo  Beijing  Rome  Frankfort  **Brussels** ** Note: As of 03/25/16 United tightened its restrictions going into Brussels and limited what types of cargo they received due to the airport bombing attack. ** (Reference #13). Future International Plans Currently United does not have plans to expand its international market for cargo operations. United manly is focusing on international markets with its passenger sector as previously mentioned.
  • 44. United Airlines 44 Conclusion This paper presented findings and analysis of United Airlines ranging from inception to fiscal year 2016. Key topics included company history, logos, livery, financial performance, key mergers, United’s fleet, domestic and international statistics, code sharing relationships, marketing segments and United’s frequent flyer program. In conclusion, United Airlines has come a long way since the beginning in 1937. It is an airline embodied with rich history and considered one of the most successful airlines to date. Like many other airlines, United has gone through arduous changes due to the ebbs and flows of the economy. However, United has persevered by adapting to the ever changing oligopoly that exists in the industry today. With both domestic and international segments, United offers quality services which has contributed to their success as one of the best legacy carriers to do business with today.
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