United Airlines plans to up the ante to compete with long-haul low-cost carriers across the Atlantic, president Scott Kirby told employees recently.
"We're going to have to get more aggressive competing with airlines like Norwegian and Wow Air," he said during an employee meeting at the Star Alliance carrier's Newark hub earlier in April in a video viewed by FlightGlobal. "We are going to do that."
Norwegian and Wow have rapidly expanded to the USA. Norwegian grew available seat miles (ASMs) by more than 50% and Wow nearly three-fold year-over-year in 2016 and more is due in 2017, FlightGlobal schedules show.
Norwegian's growth has mostly been out of London, Paris and Scandinavia, areas where the Oneworld and SkyTeam alliances are strongest. Star is strongest in markets that include Belgium, Germany and Switzerland.
This is a fact that Kirby cited earlier in April when asked by Wall Street analysts about United's relative outperformance of Delta Air Lines across the Atlantic. Passenger unit revenue in the market increased 2.1% at United while it fell 0.5% at Delta during the first quarter.
At the time, he said that United's fares to core Star markets were down roughly 10% compared to a 20% to 30% drop in core Oneworld and SkyTeam markets.
"We've done a much better job of not trashing the pricing in our markets, so Delta and American have lowered the pricing structure in a lot of their markets as low-cost carriers have grown," Kirby says in the video.
Delta is combating long-haul LCCs by expanding its segmentation initiative to the transatlantic, including its no-frills basic economy fares and, in the next few years, its new premium economy cabin.
United plans to compete with long-haul LCCs by increasing connectivity over Newark, including implementing dual approaches on the airport's parallel runways, he says.
The Chicago-based carrier plans to grow Atlantic capacity overall around the level of economic growth, says Kirby, adding that the transatlantic is a mature market.
United shrank Atlantic capacity 1.3% in the first quarter, its quarterly financials show. However, it has also increased the amount of seasonal flying in the market, reducing capacity during low periods like the first quarter and expanding during the peak summer months.
Kirby is sceptical about the success of Norwegian's rapid expansion into the USA. He says the airline's unit revenue fell 22% in the first quarter, calling those "disastrous" results.
Norwegian reported a 22% year-over-year decline in unit revenues in March, though the metric was down only 11% in February and 13% in January.
"[Those are] disastrous numbers and they are losing money," says Kirby on Norwegian in the video. "Unlike the Gulf carriers they're not subsidised by their governments and, while what they do is unfair kind of from a labour perspective, those are guys we can compete and win against."
United is among a group of US carriers that had opposed Norwegian's Irish subsidiary, which they say flouts labour laws.
Source: Cirium Dashboard