United CEO says it doesn’t want to be world’s largest airline, but size still matters

Skift Take

By saying that it would be very tough for low cost carriers to compete, United’s Smisek is almost making the antitrust argument that the legacy carriers have grown too large for the public good.

— Dennis Schaal

What does United Airlines CEO Jeff Smisek really think about a combined American Airlines-US Airways being poised to leap ahead of Delta and United, numbers one and two, respectively, as the world’s largest airline?

We may never know, but publicly, at least, Smisek says United-Continental Holdings is smaller than the two airlines were three years ago because “capacity discipline has been very, very good for this business,” and United plans to shrink the airline further.

“You will see that we have actually shrunk our airline and will shrink our airline, so for the past three years, we’re actually smaller than we were before,” Smisek says. “Proof we don’t want to be the world’s largest airline, by the way.”

But, don’t consider United a shrinking violet, either.

Smisek argues there is room in the market for niche airlines such as Spirit Airlines, but he believes it is very difficult for low cost carriers to emerge and go after United’s core business travelers. He says:

“In terms of threats to our bread-and-butter, I think not, simply because we have the network. We have the product and we have the ability to continue to improve that and continue to improve the product offering.

“Ultimately, the customer votes. And what we can offer, what we offer today at United, what we’re going to be offering over the next few years is spectacular, very hard to compete against when you’re a small carrier.”

Smisek’s comments came at the JP Morgan Aviation, Transportation and Defense Conference earlier this week.

He had some other interesting things to say, including:

  • United plans on redesigning and the airline’s mobile apps this year, and it is also slated to add renovate four United Clubs in 2013, along the lines of the upgraded United Club at O’Hare in T2.
  • United is geared up to install its new satellite-based Wi-Fi on 300 aircraft this year, and Smisek believes Wi-Fi “is the future,” and will overtake LiveTV on seatbacks. There is a benefit to that for the airline, says Smisek, adding: “And particularly, with LiveTV, we can’t communicate with the customer, lest we show them a commercial. But with Wi-Fi, we can, and that, I think, is going to be really beneficial for us and for the customers.”
  • United’s goal is to see its ancillary revenue grow 9% in 2012, and it is getting increasingly sophisticated in making that happen, Smisek says. “And Economy Plus has been a terrific opportunity for us because with the power of our SHARES platform, we can now price Economy Plus by seat, by route, by time of day, by distance, and we have much finer ability to price that product. And the revenue growth on Economy Plus has been spectacular for us.”

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