ANALYSIS: 787 firms United's position on Melbourne-LA route

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United Airlines’ announcement that it will operate its Boeing 787-9 Dreamliner on the Melbourne-Los Angeles route from October will allow it to maintain its strong presence in the southern Australian city.

United has served Melbourne since it took over Pan Am’s trans-Pacific services in the mid-1980s. At various times, it has moved between operating direct services, or as a tag flight from Auckland or Sydney.

Before it switches to a direct, six times weekly service with the 787-9s, United will have already made its biggest change on the route. In April, 258-seat Boeing 777-200ERs will take over from the 374-seat Boeing 747-400s on the route. The 777s will also take over its services to Sydney from San Francisco and Los Angeles.

On a seats-per-flight basis, there will be little impact from the change as the 777s and 787-9s have similar capacities. The effective loss of one weekly frequency, however, will result in its relative share of capacity dropping from 30.4% to 25.5%.

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Despite that, it will still comfortably retain its place as the second largest carrier on the route. Qantas accounts for the majority of capacity with daily Airbus A380 services on the route, while Virgin Australia operates only three weekly services with 777-300ERs.

Even with the small drop in capacity, United should be able to increased its returns on the route. The 787’s superior trip costs and eliminating the Sydney stopover will both help to reduce trip costs, while offering a nonstop service should allow it to gain a yield premium.

The change on the Melbourne route will also have some impact on the dynamics of the Sydney market, as it will free up more seats on the Sydney-Los Angeles route. Nevertheless, United will remain the smallest player, with only 15.8% share of the capacity. That places it marginally behind Delta with 15.9% and Virgin at 19.8%, which operate their services in a joint venture arrangement. Qantas dominates the schedule thanks to its twice-daily services – one operated by an A380 and the other a 747-400, according to Innovata schedules

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While the equipment changes will have little impact on United’s capacity position, the US carrier is seen as being in the weakest competitive position. The loss of Virgin as a codeshare partner in 2009 after that carrier aligned itself with Delta means that United now relies on gaining feed through an interline arrangement with its main rival on US routes, Qantas. While not ideal, it has no other alternative.

Longer term, it will be interesting to see if United plans to point more 787s towards destinations in the South Pacific. The airline had previously looked at launching Houston George Bush Intercontinental-Auckland services with 787-8s, but killed the plan in 2012 before launching any flights. That decision pre-dates the Melbourne 787 announcement, and could still be on the drawing board for the future.

The other possibility is that United could look to launch a 787 service to Brisbane. FlightMaps shows that only Virgin and Qantas fly Brisbane-Los Angeles services (four and seven times a week respectively), possibly leaving room open for United to enter. Nevertheless, with a lack of feed in Australia, it may prove too much of a challenge.