United Airlines Reforms Premium Option - Analyst Blog


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United Airlines - the wholly owned subsidiary of United Continental Holdings Inc. ( UAL ) - is offering premium flat-bed cabin seats on every scheduled transcontinental flight between New York's John F. Kennedy International Airport and San Francisco/Los Angeles. The company is the first U.S. airline to offer this premium service.

The revamp of the fleet is part of the company's ongoing efforts to enrich its in-flight passenger experience. The restructuring includes redesigning 15 of its The Boeing Co. 's ( BA ) 757-200 aircraft that will fly on the transcontinental routes.

The aircraft facelift will be particularly beneficial for corporate travellers as the Chicago-based carrier will now have 28 flat-bed first class seats with up to 6 feet 4 inches of sleeping space and additional storage. Further, the aircraft will have 42 Economy Plus seats with additional legroom. These amenities necessarily enhance the flying experience by adding to the comfort level of passengers. In turn, these improve the company's churn rate.

United's refurbished fleet will also include, Wi-Fi, on demand entertainment, USB ports, power outlets along with multi-course meals for its BusinessFirst customers. Expansion of flat-bed seats on coast-to-coast route would be a notable development as the company so far offered such comfortable options only on long-haul international flights.   

We tag this attempt as a strategic one as the company seeks to tap the business and travelling customers on either side of the coast. It will not be easy for United, given the strong presence of archrival Delta Airlines Inc. ( DAL ) and JetBlue Airways Corporation ( JBLU ) in New York. However, if United can competitively price its fare, the fleet revamp might yield positive results.  

Apart from aircraft designing, United recently chalked out plans to overhaul its finances as the airline behemoth has financially underperformed its domestic peers in recent times. The passenger airline plans to reduce its annual costs by $2 billion by cutting fuel cost, reducing sourcing cost, improving maintenance and optimizing distribution channels. We believe that fleet renovation coupled with the attempt to restructure its finances could improve the overall performance of the carrier.

United currently carries a Zacks Rank #3 (Hold).

BOEING CO (BA): Free Stock Analysis Report

DELTA AIR LINES (DAL): Free Stock Analysis Report

JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report

UNITED CONT HLD (UAL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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