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United Airlines complied with a legal agreement it signed in 2010 that was supposed to require it to keep its Cleveland hub open for at least five years, even after it closed that hub in 2014, according to an auditor’s report commissioned by Ohio’s attorney general.
While the report is confidential, the attorney general’s office released a summary suggesting United did not violate its agreement, which called for the carrier to operate a certain number of flights for a five-year period after its merger with Continental Airlines. The state’s then-attorney general, Richard Cordray, sought the agreement, fearing the merged airline would quickly drop the Cleveland hub, cutting jobs and hurting the region’s economy.
Under the agreement, United was not supposed to cut more than 10% of its Cleveland schedule for two years after the merger close date. In years three, four and five, United was permitted to slash its flights, but only if it could prove its Cleveland hub was losing signifiant money. The standards for what constituted Cleveland’s profitability were complicated, though in essence the agreement created a sliding scale, with United permitted to cut more flights if the hub lost more money.
“As a result of our work, we did not note any significant deviations from the Agreement’s terms and conditions,” the auditor, RSM U.S. LLP said in a June 3 executive summary. “We relied on the interpretation of specific terms and conditions within the Agreement with respect to United’s measurement of its performance at [Cleveland], which was provided by the Attorney General’s Office.”
The summary added that the auditor had made “certain observations” which it would share privately with the state attorney general’s office.
“The Ohio Attorney General auditors have confirmed our compliance with our air service commitments to Cleveland,” United said in a statement. The airline said it “…remain[s] dedicated to providing reliable and convenient air travel for our Cleveland customers.”
Before it merged with United, Cleveland was Continental’s third-largest hub, behind Newark and Houston. As recently as 2014, United flew as many as 200 daily departures. Now on many days it has about 50, mainly to large cities, such as New York LaGuardia and Boston, and other United hubs. Cleveland remains among the larger stations in United’s network.
When it closed the hub, then-United CEO Jeff Smisek told employees that Cleveland had not been profitable in more than a decade, adding that it had “…generated tens of millions of dollars of annual losses in recent years.”
United’s experience in Cleveland is not unusual. In the past two decades, United’s two main competitors, American Airlines and Delta Air Lines, have each reduced service at underperforming Midwest hubs after mergers. American closed its St. Louis hub not long after its 2001 merger with TWA, while Delta Air Lines closed its Memphis hub and significantly downsized in Cincinnati after its 2008 merger with Northwest Airlines.