Issue No. 701

United's Bold New Network Strategy Seems to Be Working

Radical reconstructive surgery? Not quite. No new hubs. No newly shuttered hubs. No mass route closures. But make no mistake: United’s network strategy is changing in meaningful ways.

It’s no mystery why. For five straight years, from 2013 through 2017, United was the bottom-dweller among America’s Big Three airlines, measured by annual operating margin. The low point was 2014, when United trailed American by five full margin points and Delta by six full points. The underperformance contributed to then-CEO Jeff Smisek’s firing the following year, making way for current CEO Oscar Munoz. An even more consequential executive move came in mid-2016, when Munoz hired Scott Kirby, Doug Parker’s righthand man at American, and before that US Airways and America West.

It hasn’t been all smooth sailing under the new regime. Far from it. In 2017, United suffered a giant publicity wound when one of its passengers was dragged off a plane, captured on video for all the world to see. That same year, Hurricane Harvey left its Houston hub largely under water, resulting in four days of suspended service and more than 7,400 flight cancellations—it was the airline’s largest-ever operational disruption. Even when the weather was good, United’s less-than-stellar punctuality was a source of discontent among business passengers.

Compounding the frustrations were weakness in China (where United is the busiest U.S. airline), a sharp decline in travel to Guam (following North Korean provocations), the relative underperformance of its co-branded credit cards (American and Delta were doing better in that realm) and a bungled rollout of basic economy fares (it made them too broadly and cheaply available, and did so months before American got around to matching, leaving it uncompetitive).

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