The writing has been on the wall for Cleveland as a major airline hub since well before the merger of United and Continental. The time has finally come for the draw-down in service there, with significant cuts coming starting later this spring. A formal press conference is scheduled for Monday but a reported internal letter from CEO Jeff Smisek is now circulating online outlining the cuts and reasoning.
Our hub in Cleveland hasn’t been profitable for over a decade, and has generated tens of millions of dollars of annual losses in recent years. We simply cannot continue to bear these losses.
Most of the cuts are coming in the regional operations, not mainline service. Of course, there isn’t much mainline service at CLE, where a 737 is only slightly jokingly referred to as a wide-body. Cuts will come over three months (April-June) and will see the number of daily departures reduced by about 60%. Only one mainline frequency is being cut but nearly 70% of the regional flights are disappearing. Cleveland will now have 72 peak daily departures, 25 of which are mainline.
When the schedule reductions are fully implemented in June, we plan to offer 72 peak-day flights from Cleveland, and serve 20 destinations from Cleveland on a non-stop basis, including to all our hubs, and to key business markets likeLGA, DCA and BOS. We will also serve from Cleveland on a non-stop basis key leisure markets, like FLL, MCO, TPAand RSW. Importantly, our new schedule out of Cleveland will cover 58% of the current Cleveland-originating domestic passenger demand on a non-stop basis, and will permit Cleveland residents to fly to almost every one of the destinations they fly to today, by connecting over one or more of our other hubs.
As part of the route cuts more than 450 positions are expected to be cut in airport operations and catering. Some are expected to be offered the opportunity to transfer to other bases; others will be terminated outright.
Perhaps the only surprising bit is that CLE lasted as a hub this long. Then again, United has made a habit lately of trying to convince the public that they have operated in markets at a loss for extended periods while maintaining service. The IAH-CDG route was similarly described in the announcement of its demise. I like the idea of giving a market the chance to recover and survive or thrive but it seems that perhaps United (really the sCO side, I suppose) has done that too often and for too long.
UPDATE (7:45pm EDT 1 Feb 2014): Some more details are now emerging in terms of which routes will be cut/kept. Here’s one view:
Destinations being cut include: ATL, AUS, BUF, BTV, CLT, CMH, DAY, ERI, FNT, GRR, AVP, BDL, IND, MCI, SDF, MHT, MIA, MSP, YUL, BNA, MSY, OKC, PHL, PHC, PIT, PWM, PVD, RDU, RIC, ROC, SYR, YYZ and a couple others I don’t know the code for off-hand.
That leaves the following: ALB, BWI, BOS, ORD, DFW, DEN, FLL, RSW, IAH, LAS, LAX, MKE, LGA, EWR, MCO, SFO, STL, TPA, IAD, DCA and seasonal to CUN, NAS, SJU, and CHS.
The in-flight crew bases will remain as the mainline operations will be relatively unaffected. The job cuts are coming in airport operations (above and below the wing) and catering.
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At least they left some space in that ad/banner to put “UN” between CLE and friendly…
Or maybe the statement that the CLE hub hasn’t been profitable in over a decade takes poetic license or depends on what accounting treatment you give it. It does make little economic sense that they’ve kept it this long, but perhaps it has long had a positive contribution margin, and a negative fully allocated cost margin. Meaning that the Company’s overall absolute profit was higher with the hub, but the hub still wasn’t covering its share of corporate overhead. It’s conceivable that the absolute profit doesn’t get enhanced by the change, but the Company’s profit margin does increase, and Smisek’s compensation seems to be tied to profit margin. It’s also the case that pre-merger there was likely traffic connecting via CLE that CO couldn’t capture, but now enough of it can flow through ORD or IAD instead, that CLE is redundant for the network design.
Nevertheless it is entirely possible that technically CLE has been loss-making on a fully allocated basis, and that’s what he is saying in his letter, while for most of the decade it had a positive contribution margin, and that is why management kept it.
Simply put, the midwest had too many hubs – DTW, CLE, CVG, between NY and Chicago
MEM was too close to ATL for DL. PIT was too close to PHL for US.
It remains to be seen if PHL (not too much OD traffic but more connecting traffic) continues to live after AA/US merge.
I suspect given the trouble with connections at JFK, PHL will be a connection hub for AA.
and LGA and JFK will live on as O/D hubs for NY for domestic and intl traffic.
Sad to see CLE go, really a shame a easy to use airport. But the last several times I was there it was a ghost town for the last year or two.
For Manchester MHT this is bad, unless they increase ORD frequency.
Not good at all, I bet 90% of the markets that are losing their 2-3x daily CLE flights, won’t see said capacity be replicated through other hubs. The only reason I am a little annoyed at yet another capacity cut is that PIT has already seen a lot of cuts.
I am also sure most of those cities still retaining nonstop flights will see frequency cuts, nonstop option will still be there at an exorbitant price, but far less options. Some cities will be axed completely it seems [ERI, BFD, DUJ, FKL, JHW, and PKB] unless they transfer those flights to IAD – doubt EWR/ORD has much room for flights to those cities.
We know what will happen to those non-hub mainline flights over the next few years… Feeder traffic dries up, yields tanks and then at that time they will declare those flights unprofitable and cut them one by one.
The UA cut, cut, cut, cut, cut mantra continues [no interest in identifying why it is unprofitable and how can we make it profitable]… This cut is a little more obvious than the other cuts we have had in the past few years. Customers almost always loses in airline mergers.
Oh well, if the flight options are not working for me, then I need to do something about it rather than whining.
*cut, cut, cut does not focus on just capacity cuts, but cuts in product, cuts in service, cuts in benefits, etc.
I find it interesting that they will keep LGA-CLE. It shows that they admit LGA has SOME pull…now if we could just get some flights to other places people may want to go to from LGA, other than hubs. I believe this will be LGA’s only service to a non-hub airport on UA.
One thing in the letter Jeff mentions repeatedly is the pilot shortage due to regulation changes. I’m curious as to whether this change will fundamentally affect regional flying. If salaries rise significantly many regional routes may just not make sense anymore with the size jets they use.
No offense to Cleveland intended, but it is rather surprising that anyone would have ever thought to put a hub in Cleveland. The location is just plain wrong and the city is not big enough. ffi and Carl make some more detailed points worth reading.
Well, back when Continental was single, they didn’t have a Midwest hub. Chicago? No way. Cleveland was good for their operations then.
But was it really, jan??
The claim made by Smisek was that it was unprofitable for 10 years. That goes well back into the Continental days.
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