Vaccine Euphoria Isn’t Deterring United From Conservative Approach as Year-End Cancellations Rise

Even with a gloomy outlook for the upcoming holiday season from an uptick in last-minute flight cancellations, United Airlines Chief Commercial Officer Andrew Nocella shared an optimistic outlook at Skift Aviation Forum on Thursday. From encouraging vaccine news to demonstrated pent-up travel demand, and a successful pre-flight testing program for Hawaii and London, the airline is confident that both international and business travel will return.

Headlines causing cancellations, not new CDC recommendation

As recent headlines are discouraging Americans from travel, United Airlines indicated that the airline is beginning to see a rise in cancellations for the upcoming holiday.

“Right now we are definitely seeing a little bit of weakness on new bookings, but more interesting I think is we launched this policy of no change fees in the United States and in fact people are using that opportunity to make changes right now and to cancel their tickets for one reason or another,” Nocella said. “So we’re seeing more cancels than normal and that’s a trend we’re seeing and it’s likely dictated by the headlines that we’re reading about.”

Nocella pointed out, however, that positive headlines of a vaccine on the horizon also indicated “a light at the end of the tunnel coming really, really soon.”

“What we can tell you right now is that we did see this slow down in the bookings but more importantly we saw an uptick in the level of cancellations and that was quite frankly prior to this new CDC recommendation.”

The airline was optimistic on its continued conservative approach towards adding capacity, noting that its revenue guidance in Thursday’s 8-K report filing remained unchanged. “We planned our capacity accordingly,” Nocella told Brian Sumers, Skift Editor-at-Large. “[Q]uite honestly we’re down more capacity year to year than just about every competitor over the next couple of months. We did that conservatively. We always said we were gonna wait to see new demand before we grew too fast and we’ve put the level of seats out there that’s commensurate with not a straight line recovery but a choppy one. We’re really prepared for the fourth quarter.”

There Is Pent-Up Travel Demand

“I will say that even back in July and August, people were making reservations for spring break. There is a lot of pent up demand. People want to go see their relatives, they want to go to the beach, they want to have some fun, they want to get out of their bedrooms. So we know it’s out there.”

Nocella pointed to the high demand for Mexico, where Covid pre-entry or departure requirements are non-existent. “Cancun and Cabo are going to be very popular over the next few months is my take, because it’s one of the easier places to get to in the world without a lot of restrictions.”

Launch of Pre flight Testing to Hawaii “Amazingly Successful”

Scott Kirby, United CEO, was among the first to alert the industry that the virus would hit airlines hard, predicting that airline business would drop by 70 percent for multiple months.

“Once the virus spread to Italy, it was really clear that […] it was everywhere else, including here in the U.S. That was the assumption we made and we decided to get ahead of this. We cut the capacity, we raised the capital, and we’re glad we did, we are a few steps ahead of this and it also allowed us to be a few steps ahead I think on the whole safety measures on board the aircraft. [A]nd now recently in testing — we launched the first testing from SFO (San Francisco Airport) to Hawaii to reopen the Hawaiian Islands for people that would like to go on vacation.”

United’s testing program has since expanded to the New York–Heathrow route. “We believe testing is critical to reopening the borders around the world,” Nocella said to Sumers during the Skift Aviation Forum. “While governments haven’t exactly accepted our premise here, we’re pretty confident that if we keep pushing down this road that hopefully at some point we gain traction from governments and with a good test you’re able to get to where you need to go without a quarantine.”

United’s Global Network And International Demand Will Return

While its global network has changed a little, United remains optimistic that international demand will return and that its seven hubs will bounce back when that happens. “We’ve definitely spread out the fleet. We’ve added a bunch of new destinations such as Bangalore, which is our most requested destination out of San Francisco, of all time. We have Johannesburg, we have a unique opportunity to fly nonstop in both directions between Johannesburg and United States [.]”

United expects to have less frequently to places it once had numerous flights to, but that things will return to normal eventually. “[Overall with a pause of a year or two we think we’re going to get back on track and we think international demand is coming back,” Nocella said. “We are all social creatures, we want to get out there, we want to see the world. Quite frankly, we have the best international gateways. If you’re trying to launch to Europe or South America or Asia, you want to do that out of our gateways, it’s where there’s a lot of business traffic […] they’re great cities for inbound tourism as well, they’re where international aviation really started and really operates from even today predominantly, and we’re confident that when the bounce back occurs it bounces back first in our hubs and then later in other hubs.”

United’s domestic network looks a lot different now, but once demand comes back, it will focus on having the right connectivity, and the right connections with small communities which United has been lacking for years and start moving away from 50 seaters with no first class.

“There’s a lot we’re working on; Covid definitely has caused us a bit of a pause but we believe in these seven hubs — we think they have a lot of growth potential and we are going to continue to execute on that when demand comes.”

Business Traffic Will Come Back

“I think we’re going to keep things as they are,” Nocella said. “We believe in our business plan and we believe business traffic is going to come back. It’s pretty obvious when you look at the numbers. Covid demand changes have hit United Airlines probably harder than the average airline simply because New York and San Francisco are much more impacted from a demand perspective and we’ve managed through it the best we can. [B]ut knowing that we had a harder hand of cards to play I think we’re doing pretty well.”

United Keeping JFK Operation Small For Now

United’s JFK-LAX-SFO four flights a day have gotten a lot of attention, and the airline hopes to continue its small operation there indefinitely for now.

“In particular, we would really like to get back into the game of carrying more media and entertainment clients and JFK has been their preferred airport,” Nocella said. “And this is a chance to get back in that game where other primary competitors do that very well. We’d like to compete in that space and flying to JFK allows us to do so.”

Before United Airlines made what Nocella called “the horrible mistake” of leaving JFK, it operated 15 or 16 flights a day out of JFK. “There’s no doubt if there was a way to have a much larger operation at JFK that’s something we would seriously consider.”