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  • Dulles fortunes turn on lower costs as United maps growth

Dulles fortunes turn on lower costs as United maps growth

United Airlines could double the number of flights it operates from Washington Dulles International airport, putting the once questionable hub on firmer and firmer footing.

Ankit Gupta, vice-president of domestic network planning at the Chicago-based carrier, told investors at an Evercore conference during the week of 4 March that United is considering adding two to four new flight banks at Dulles – an increase that could amount to doubling its current four-bank schedule.

A bank is when an airline clusters a large number of arriving and departing flights together to facilitate connections.

The new flights, many of which would likely be added to existing destinations, would significantly increase connectivity over Dulles, particularly in the busy north-south market along the US East Coast where United only has a small share of today, Gupta said.

"Dulles… is a great connecting hub for us," Gupta told FlightGlobal in June 2018. "We want to position Dulles as somewhere you can travel from across the globe… but also be able to connect to from all up and down the East Coast."

Costs are driving United's newfound adoration for Dulles. The airline saw profitability improve on connecting spokes that it moved to the airport from its Newark hub because of lower costs at Dulles, Gupta told Evercore citing Ithaca as an example.

Calling Dulles the "lower cost hub" is an about-face for United.

In 2013, United's then chief executive Jeff Smisek said it was "more difficult to do business" at Dulles than at its other hubs due to the airport's high debt burden, which rose dramatically after the opening of a fourth runway in 2008 and the underground AeroTrain in 2010.

“This hub also disproportionately bears a lot of debt service… which is a terrible competitive burden and inappropriate burden on this hub,” he said, raising questions over the future of United's hub there.

Dulles operator the Metropolitan Washington Airports Authority (MWAA) took Smisek's thinly veiled threat to heart. Though a new agreement with airlines, and later a $50 million grant from Virginia, the authority lowered the cost per enplanement (CPE) – how much it costs an airline to carry a passenger from an airport – to $17 per passenger last year from a peak of $26.55 in 2014.

Average CPE at Newark was $26.77 in 2017, the latest data available from the US Department of Transportation shows.

Now United, which Cirium schedules data shows cut seats at airport by nearly 18% from 2010 to 2015, could be on the cusp of one of its largest expansions at Dulles since it opened its hub at there in 1986.

The carrier grew seats at the airport by 5.8% in 2018, and is scheduled to grow them another 6% this year, schedules show. It plans to grow system capacity by 4-6% in 2019.

JP Morgan analysts call the system growth plans, which United launched a year ago in an effort to recapture what it views as its natural share of the US domestic market, "highly rational for United’s competitive positioning" in a report on 6 March.

The mainline carrier is on a tear with new markets from Dulles. It added nine new routes in 2018, including shifting Chattanooga, Ithaca and Wilkes-Barre/Scranton from Newark, and plans to add at least eight more this year, including shifting Elmira, Lexington and Manchester (New Hampshire) from its New York-area hub.

"We've grown Dulles pretty aggressively this year, and it's done really well," said Scott Kirby, president of United, last August when he first disclosed that the airline was considering more flight banks there.

Dulles, for its part, is ready. Passenger numbers reached 24.1 million last year, ahead of Ronald Reagan Washington National for the first time in three years and their highest since 2007. The airport still lags the DC region's busiest, Baltimore/Washington International, which handled 27.1 million passengers in 2018.

"We're really excited about what United's doing in terms of using Dulles as a hub – things are looking up," MWAA president Jack Potter told FlightGlobal at the US Chamber of Commerce aviation summit in Washington DC on 7 March.

Potter set a new goal for the airport, to handle 30 million annual passengers, before the authority will consider significant new capital investments. This includes the long sought by passengers replacement of "temporary" concourses C and D, which United has used for its hub since the 1980s.

The addition of more flight banks by United, let alone doubling the number it operates, would go a long way towards meeting Potter's 30 million passengers target for the airport.

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