The ULH challenge: United cuts LA-Singapore

Developing a new route to profitability often takes months, if not years. United airlines is pulling the plug on its nonstop service between Los Angeles and Singapore after just one year, a quick decision that reflects the challenges of ultra long-haul flights and the rising costs of fuel. This is not the only ULH route facing reduced service or questions around the viability of this segment of the industry, even as new, longer services are poised to launch.

United will move its service to San Francisco at the end of October, bringing double-daily nonstop flights from its west coast hub. By offsetting the flight times the carrier can pick up additional demand for the evening arrival in Singapore or a night time departure returning to the United Stares. The airline also brings connecting feed to the service at San Francisco, something it struggles to deliver in Los Angeles. The new schedule limits the connection points but remains a more viable option than the LAX routing.

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Fuel Costs

Rising fuel costs impact the viability of ULH routes more than shorter flights. The expense of carrying the extra fuel needed for the final hour of flight increases dramatically as the routes become longer and the price of fuel is up roughly 50% since the LAX-Singapore route was announced in June 2017. Routes that were viable at $50-60/bbl can quickly become a bloodbath at $80/bbl rates.

But if it were just a fuel cost issue then moving the route to San Francisco would not truly address the problem. Trying to run the service at San Francisco presented other challenges for United Airlines.

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Connecting Flow

United expected the route to deliver “optimal connections” to more than 20 other US destinations in the carrier’s route network. That connecting flow is critical to the economics of the long-haul flights. It seems that less of that traffic came along than the company hoped.

Shifting the second service to SFO could capture more connecting traffic, though the flight schedule presents some difficulty on that front. UA 29 will depart SFO just before 11a, meaning passengers will need an arrival into SFO prior to 9:30a for a reasonable connection. A brief review of scheduled flights suggests that United can feed from far more than the 20 airports LAX offered – including several east of the Mississippi – even with that early departure time. On the return to the USA the onward connections are more limited owing to the late arrival time in SFO (18:50 in the winter, 20:55 in the summer). Even the asymmetrical feed is likely more valuable to the carrier, especially owing to its stronger local traffic pull at San Francisco.

Adjusting the domestic traffic away from feeding the Singapore service in Los Angeles may deliver other benefits to the overall network profitability as well. United can focus on selling those seats to higher yielding connections or to nonstop travelers. This matches the theory American Airlines suggested as a driving force behind its choice to ax its Chicago-Beijing service. Whether that actually proves an economic boost remains to be seen.

Blocked Seats

Reports suggest that more than 50 economy class seats were regularly blocked on the LA-Singapore flight. That’s great news for those looking to make the 9-abreast 787 section slightly more comfortable. Similar blocked seat numbers are seen on United’s Houston-Sydney service, a route also seeing some seasonal cuts. On a recent Dallas-Sydney service Qantas blocked 100 seats on its A380. Qatar Airways keeps a number of seats blocked on its Doha-Auckland service as well.

Singapore Airlines previously toyed with a variety of aircraft configurations when it previously operated nonstop service between Singapore and the USA. Its A350-900 serving SFO today runs with a limited number of blocked seats. The future A350-900ULR that will eventually serve Newark and Los Angeles will be fitted with only 161 seats in a mix of business and premium economy. That’s a significant cut from the 253 seats on the current configuration.

Reducing the seats sold means less weight carried, extending the range of the aircraft. It also means far tighter economic circumstances under which the carrier must operate. With a narrower window for profit on these flights it is no surprise that some of them struggle.

Cut quick or let it ride??

The last time these routes were flown a spike in fuel costs and global economic uncertainty did them in. This time around the planes are far more efficient and the fuel costs not as high, but Singapore Airlines also is not driving a significant revenue premium versus connecting routes. It remains to be seen if the economics can work out long term.

And maybe it should be seen as surprising that the airlines are not willing to ride out the ramp up time for the new services, giving them the opportunity to develop into a successful operation. Then again, responding quickly to changes in the market is a play more commonly rewarded by Wall Street. If the route was soft to begin with the increased costs are enough to tank it faster than normal.