ANALYSIS: United makes good on Houston capacity cut threat

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United Airlines is making good on its threat to cut capacity in Houston.

One year after stating that it would cut current and planned capacity at the city's Intercontinental airport by up to 10% by 2015, available seat kilometres (ASKs) on the Chicago-based carrier are down 11.4% this month compared to June 2012, according to Flightglobal/Innovata data.

"Houston is a vital international hub for United and our primary gateway to Latin America," says United. "We disagreed with the decision to split the city's international air service, but we remain committed to Houston. United operates nearly 600 flights to more that 180 destinations worldwide from the Houston hub."

The airline adds that capacity is only down 6% year-on-year this month based on its own numbers.

United announced the cuts in May 2012 after the Houston city council approved construction of an international federal inspection services facility at Hobby airport championed by competitor Southwest Airlines. The low-fare airline plans to use the facility for flights to the Caribbean, Mexico, and Central and South America - all markets served by United from Intercontinental.

"This will harm us and IAH [Intercontinental], but IAH will continue to be a strong hub for United," said Jeff Smisek, chief executive of United, last year. "Unfortunately, the city of Houston will suffer the consequences of this decision for decades to come."

United has ended flights to Aruba, Asheville, Cedar Rapids, Del Rio, Greensboro, Mazatlan and Paris Charles de Gaulle from Houston since June 2012, according to Innovata FlightMaps Analytics. It also cancelled planned service to Auckland.

United Houston routes ended between June 2012 and June 2013

Innovata FlightMaps Analytics

But Houston is not the only airport feeling capacity cuts by the airline.

United cut ASKs systemwide by 7.7% between June 2012 and June 2013, according to Flightglobal/Innovata. Seven of its eight domestic hubs saw capacity declines, with Cleveland seeing the most with a 16% decrease to 364 million ASKs in June.

Flightglobal/Innovata

San Francisco bucked the trend with a 3% increase in ASKs. This is likely due to the concentration of the airline's fleet of 374-seat Boeing 747-400s at the airport as part of United's fleet rationalisation strategy. The airline added new flights to Paris Charles de Gaulle and upgauged Frankfurt, London Heathrow, Osaka Kansai and Tokyo Narita to the larger aircraft from up to 348-seat Boeing 777-200s.

CAPACITY OPTIMISATION

Winners and losers emerge when the change in individual hub ASKs are compared to the system changes during the past year. Denver, Los Angeles, Newark and San Francisco saw capacity grow - shrinking less than the system average - while Chicago O'Hare, Cleveland, Houston and Washington Dulles shrank.

The biggest changes were again in San Francisco where ASKs rose by 10.7 percentage points more than the average decline and Cleveland where capacity fell by 8.3 points.

Flightglobal/Innovata

These changes shed light on United's capacity optimisation efforts. Coastal cities (Los Angeles, Newark and San Francisco) and ones on direct routes between the coasts (Denver) are emerging as priorities at the airline versus the mega-hubs in Chicago and Houston at pre-merger United and Continental Airlines, respectively.

Some of these hubs are even expected to grow this year. Brian Znotins, vice-president of network at United, told the Wall Street Journal recently that the carrier intends to increase capacity in Denver by 4% this year compared to 2012.

Despite the evidence, these trends are not hard rules. Chicago, which is also on a direct route between the coasts, saw capacity fall by 1.7 percentage points more than the system and Washington Dulles - a well positioned airport in the middle of the east coast - shrank by 0.6 points.

Capacity is also a highly variable number. Just one month later in July, system capacity is slated to be down 6.4% while in Cleveland it will decrease by 17.8% and San Francisco increase by 2.9% compared to 2012, according to Flightglobal/Innovata. Houston capacity will shrink by 8.3%.

United confirms that it varies capacity from month-to-month and even day-to-day to match seasonal demand changes.

United's schedule remains very much in flux. It is in the midst of optimising its regional fleet with larger Bombardier CRJ700s and Embraer 170s being redeployed at former Continental hubs, which was allowed under its joint pilots agreement that was ratified in December. Flights on the 66-seat CRJ700s between Houston and Queretaro, Tampico and Villahermosa begin this month.

The carrier is also in the process of reintroducing its six Boeing 787s, which were grounded from January to May. Domestic flights resumed on 20 May and limited international service begins on 10 June and full service is set to resume in August.

United retired its last Boeing 737-500s and 767-200ERs at the end of May.

Schedule and capacity variations are likely to continue. United will begin adding 70 76-seat Embraer 175s and reducing the number of 50-seat regional jets in its fleet next year. Znotins told Flightglobal in May that the move will result in some frequency reductions but declined to comment on any network changes.