Dulles International Airport might be the most vulnerable to major cutbacks of United Airlines' five hubs after the nation's second-largest carrier files for bankruptcy, aviation analysts say.
Although Dulles is United's only hub on the East Coast and connects passengers to key European cities over the Atlantic, analysts said the airline is not as financially tied to Dulles as to other hubs in Chicago and Denver, where United owns terminals and other facilities. Moreover, with only 76 flights a day at Dulles, United has not fully developed a powerful international hub there, analysts said. Some industry observers are already speculating about which carriers will move in if United scales back at Dulles.
UAL Corp., United's parent company, plans to file today for bankruptcy reorganization. United's pilots union yesterday encouraged travelers not to abandon the airline if it files for bankruptcy.
"There will be some pockets of pain at the edges" at Dulles because of the filing, said Leo J. Schefer, president of the Washington Airports Task Force, an organization that markets Washington airports to airlines to spur economic development. "But, basically, the competitors will take over."
Despite being rejected last week for $1.8 billion in federal loan guarantees, United said operations will continue as usual for now. But changes may unfold, as the airline has announced a series of flight cuts and layoffs in an effort to reduce costs.
At Dulles, United carries 38 percent of the airport's passengers, has about half the international market, and employs about 3,000 pilots, flight attendants, gate agents and baggage handlers. (United has 6 percent of the passengers at Reagan National Airport and about 7 percent of passengers at Baltimore-Washington International Airport.) As part of cost-cutting measures, the company has announced it will cut four international destinations from Dulles by January, although it recently announced it would add two destinations to South America.
Joe Hopkins, a United spokesman, declined to comment on whether Dulles was more vulnerable to cuts than the airline's other hubs. "We are going to trim routes systemwide," Hopkins said, referring to the previously announced plan to cut 12 percent of the airline's flights by June 2003. "What we're doing is no different from the other [airlines] trying to arrive at the right balance."
To some analysts, though, the problem is not that Dulles isn't an important hub, it's that other United hubs are much stronger.
"Most of United's hubs are pretty strong, in Chicago, San Francisco, Denver," said Philip Baggaley, managing director at Standard & Poor's. "United's experience at Dulles has been sort of up and down."
United's home base in Chicago is viewed as its most valuable asset because of its location in the middle of the country, which makes it a key connection point, and because it has already invested so much at O'Hare International Airport in its fight for supremacy there against the world's largest airline, American Airlines Inc. United has a massive terminal at O'Hare and 20,000 employees in the area. "Chicago is probably one of last places I'd give up," said Douglas E. Abbey, president of consulting firm AvStat Associates Inc. in Washington.
San Francisco International and Los Angeles International airports serve as United's strong footing from the United States across the Pacific. In Denver, United is the dominant carrier in a large market served by one major airport.
That leaves Dulles. Unlike at some other hubs, United does not own any terminals, cargo facilities or other major investments there to lock it into a long-term presence. In fact, after last year's terrorist attacks, the Washington Metropolitan Airports Authority, which operates Dulles and National, decided to delay construction of a $1 billion concourse, which United was expected to help pay for and of which it was to occupy 95 percent.
In a statement, the airport authority said it "will continue to work closely with United Airlines as they determine any restructuring or changes to service. The authority remains confident in the strength of the Washington region's air travel market."
Brian D. Harris, an analyst at Salomon Smith Barney Inc., disagreed with the notion that Dulles would be the likeliest candidate for the chopping block. United might just as well trim the fat off of each of its hubs rather than drastically cut or eliminate one entire hub.
"Dulles has got great potential," Harris said. "It's got relatively benign infrastructure constraints, and it has never been fully built into a mega-hub. I'd view it as a strategic asset."
So far, United's domestic cost-cutting strategy has largely involved turning marginal or money-losing flights over to its United Express regional airline partners, such as Dulles-based Atlantic Coast Airlines. United continues to sell seats on these flights and pays Atlantic Coast a fee per departure. But United is limited by the contracts with its pilots union on the number of flights it can turn over to the regionals.
Seeing that those constraints might force United to drop some flights, competitors such as JetBlue are probably already eyeing United's slots at Dulles, said AvStat's Abbey.
JetBlue, a low-fare carrier that serves a handful of markets on the East and West coasts, already competes with United with identical non-stop flights from Dulles to Oakland, Calif., and Florida. JetBlue has more than held its own, despite relying solely on point-to-point traffic. From April to June this year, it flew 27,878 passengers between Dulles and Oakland, while United flew 21,404, according to the Bureau of Transportation Statistics.
JetBlue declined to comment on whether it would try to take advantage of United's expected cutbacks. It said it intends to focus on increasing service between northern cities and Florida for the next several months.
JetBlue spokeswoman Fiona Morrisson said it was United that sought to take on JetBlue rather than the other way around. United announced its nonstop service to Oakland from Dulles shortly after JetBlue made its announcement, she said. "They're looking to protect their turf," Morrisson said. "Our focus isn't adding new cities. Our focus is serving demand."
Other low-fare carriers, such as AirTran Airways, which rapidly expanded its service out of BWI after US Airways pulled out last year, might also see a chance to benefit from United's financial problems, said Baggaley, of Standard & Poor's. Southwest Airlines' rapid expansion at BWI positioned it as the Washington area's airport for low fares. National has largely captured the business traveler, but "Dulles is kind of a mix," Baggaley said.
AirTran's predecessor, ValuJet, had a major presence at Dulles in the mid-1990s. AirTran spokesman Tad Hutcheson declined to comment on the current situation at Dulles, but said, "We are looking at market opportunities and we are looking for markets that are under-served and overcharged."
Low-fare carriers were the salvation of BWI last year, after US Airways closed its BWI-based MetroJet unit because of financial problems after the terrorist hijackings.
US Airways' market share there has fallen from 24 percent in 2000 to 8.7 percent, according to BWI. Meanwhile, Southwest Airlines took over US Airways' ticket counters and increased its share of BWI traffic to 43.7 percent this year from 24 percent two years ago.
"We never want to see any of our airlines in any kind of trouble," said Tracy Newman, a BWI spokeswoman.
"But we know that in the case of MetroJet, when they said they wouldn't be flying, we didn't have a problem finding someone to come in."