Should UA De-Hub IAD? Some think so...

**ddagencylv** · 27-Jun-2014, 10:05 AM

This spring, United (UAL) dropped Cleveland as a hub, citing the airport’s financial underperformance. Yet the airline’s Washington Dulles hub is at least as unprofitable, and the airline should ditch it, a veteran analyst said today.In a let-me-count-the-ways report, Imperial Capital analyst Bob McAdoo explains how United has bungled key aspects of its merger with Continental. ”UAL has yet to adopt key steps taken in recent successful airline mergers, and we are unsure why,” he wrote. “Regardless, lacking certain sweeping network and fleet changes, it may be difficult for UAL to produce returns comparable to its peers.”

Much as US Airways favored its Philadelphia hub over Pittsburgh and Delta slashed flights at its Cincinnati and Memphis hubs when it acquired Northwest’s Detroit hub, United now has competing hubs in Washington, D.C., and Newark, N.J. “[United] would not operate two payroll departments, so we wonder why it would operate two hubs only 211 miles apart,” wrote McAdoo.United built its hub at Washington Dulles in the early 1990s to compete with a burgeoning Continental hub in Newark. Both focused on European flights, although United lacked the population base Continental enjoyed in metro New York. “IAD was the best option for United to connect traffic to Europe,” McAdoo wrote. “However, today the Dulles hub is the smallest in the Northeast, carrying fewer passengers to Europe than [Newark], than Delta at JFK or American Airlines/US Airways in Philadelphia.” The Dulles hub also faces steep competition from American’s hub at Reagan National Airport, which is about 30 miles closer to the nation’s capital and is preferred by many travelers going to the city. That airport is also gaining new, lower-cost options as JetBlue (JBLU) and Southwest(LUV) have recently won access to expand there.

**spongebue** · 27-Jun-2014, 11:47 AM

That one is easy. The Washington area is the 7th most populated metro area in the country, and growing like wildfire. Cleveland is at #29 and shrinking. Washington has some HUGE big-money industries in the area - obviously the politically-based stuff, but there's also a lot surrounding that. Major government contractors - Lockheed Martin, Boeing, you name it - either they have offices in the area, or they'll travel to Washington to meet with people in the Pentagon (or what have you). CLE? What do they even have? Best I can really guess is a few auto parts manufacturers (and I'm sure they aren't doing so hot) and I don't know... chili on spaghetti? Ok, that's actually really tasty. But you can't even compare the two.

Yes, there's also DCA. But a city that large can absolutely support a second (3rd if you include BWI) airport. NYC has JFK, LGA, and EWR. Chicago has ORD and MDW. SFO also has SJC and OAK. LAX has ONT and SNA and LGB and BUR. I could go on... either way, even if there is a loss *now*, the potential for the area is screaming at you!

I would also love to see more EU flights out of IAD (who wouldn't want more routes? That's the most fun part of an airline). But realistically, UA pre-merger was always focused more on Asia than it was Europe or South/Central America. Continental was the opposite. From a routing perspective, the merger really helped each other fill in the gaps. Oh, and that point about IAD and EWR being 200 miles apart? EWR and CLE were hubs under the same airline much longer before the merger. According to SHARES, they're just under 300 miles apart, and the only other hub they had was IAH.

Bottom line: CLE was doomed a long time ago.

**29palms** · 27-Jun-2014, 04:31 PM

IAD took on the B-767 heavy checks. I think there is a lot of hate mail going out and this stemming from UAL recent loss last quarter from all the snow in the Northeast. All that snow blowing sideways from IAD to BOS. We will see how these recent implemented changes will take effect and see if the analyst are even in the ballpark.

**Migflanker** · 27-Jun-2014, 09:54 PM

Originally Posted by spongebue

CLE? What do they even have? Best I can really guess is a few auto parts manufacturers (and I'm sure they aren't doing so hot) and I don't know... chili on spaghetti? Ok, that's actually really tasty. But you can't even compare the two.

Oh Brian better keep your head below the parapet with that comment.

Although…..I’ve always wondered why the induction ceremony for the Rock & Roll Hall Of Fame is held in NYC and not in Cleveland….. at the museum.

**mrs767er** · 28-Jun-2014, 06:20 AM

CINCINNATI chili, Brian
CLV--a lake that's eerie and a river that burned
There are too many Cleveburger jokes; don't get me started

**29palms** · 28-Jun-2014, 08:29 AM

I actually liked Cleveland. Definitely a "has had better times" city though in terms of industry. Big in all kinds of manufacturing and auto assembly, tires. Lots of closed down brick buildings but they seemed to have turned some of these buildings into "THE FLATS" area with nice renovated bars and things like that. Rock and roll hall of fame is pretty cool, the downtown area has a certain charm to it. Browns Stadium, the baseball park what's it called again? Jacobi field or something? Cavalier center for basketball? All walking distance. The lake is cool and temperatures in July early morning hours can be in the high 50's. Very pleasant summers there in comparison to down here. A lot of diversity with Polish, German, Italian neighborhoods each sponsoring their own festivities with authentic dishes. Very NORTHEAST like and Chicago, Milwaukee like. I know winters can be quite cold. If Paul Newman was from Cleveland Ohio, it can't be a bad place. Yea, that river fire back in the 60's, they even have a beer named after it. I wouldn't mind living there. If I was ever forced to work there, it wouldn't break my heart any.

**spongebue** · 28-Jun-2014, 06:05 PM

Originally Posted by mrs767er

CINCINNATI chili, Brian

I figured it was one of the two. I had a 50/50 chance!

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